OCBC-Wing Hang Bank takeover deal a question of price
While city lender wants more, Singapore group fears making goodwill charges after takeover
Oversea-Chinese Banking Corp's plan to take over Wing Hang Bank, the city's second-largest family-controlled bank, raises the question of what would be a reasonable price for both parties to gain from the deal.
Although OCBC is reluctant to pay too much - bearing in mind that others had to make massive goodwill provisions after the acquisition of banks in Hong Kong - analysts expect it to cough up close to twice book value and possibly higher than the 2.08 times deal for Chong Hing Bank.
Only three family-controlled banks are left in the city after Yue Xiu's bid - backed by the Guangzhou government - for Chong Hing, in October last year.
Wing Hang has confirmed it was holding exclusive talks with OCBC until the end of the month for a possible sale to the Singaporean bank.
While OCBC might be prepared to pay about 1.9 times book value, Wing Hang had always aspired for more, reports said.
"Wing Hang carries a scarcity value," said Grace Wu, an analyst at Daiwa Capital Markets, which expects a price at two times value.
The bank ranks second in size by assets among the three family-owned banks, which makes it more affordable to a buyer than Bank of East Asia, which has more than twice Wing Hang's market capitalisation.