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OCBC's bid for HK's Wing Hang raises valuation, funding concerns

Published on Jan 6, 2014 1:59 PM
 
Singapore OCBC's bid to take over Hong Kong's Wing Hang Bank in a deal estimated at US$5.3 billion has raised concerns it may be paying too much for a mid-sized bank and will be tapping shareholders to fund the acquisition. -- ST FILE PHOTO: KUA CHEE SIONG

SINGAPORE (Reuters) - Singapore OCBC's bid to take over Hong Kong's Wing Hang Bank in a deal estimated at US$5.3 billion has raised concerns it may be paying too much for a mid-sized bank and will be tapping shareholders to fund the acquisition.

Oversea-Chinese Banking Corp, Singapore's second-biggest bank, has begun exclusive talks with Wing Hang, offering nearly twice the Hong Kong lender's book value, two people familiar with the deal told Reuters on Friday.

Shares of OCBC fell as much as 1.9 per cent in early trading on Monday before a trading halt was imposed at the bank's request. Trade in Wing Hang's shares were also suspended at its request. They last changed hands down 1.4 per cent.

While an acquisition of Wing Hang would give OCBC a gateway into mainland China and help bridge the gap with DBS Group Holdings, which operates Hong Kong's fifth-biggest bank Dao Heng, UBS analysts say the deal would require "sizeable capital raising" by OCBC and would likely be dilutive for shareholders.

 
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