OCBC Bank has confirmed that it is bidding to buy Hong Kong-based Wing Hang Bank.
It disclosed that it had entered into an exclusive agreement with the major shareholders of Wing Hang, the Fung family and BNY International Financing Corp to hammer out a deal.
The exclusivity agreement lasts until Jan 31.
During this period, the sellers cannot entertain interest from any other bidders.
Hong Kong's Fung family and BNY International Financing Corp control 45 per cent of Wing Hang.
Fears that OCBC may have offered too much for Wing Hang caused its share price to slip today, before it requested a trading halt at 10.25am.
OCBC stocks were last done at $9.87, a drop of 15 cents or 1.5 per cent prior to the trading halt.
Wing Hang's shares also fell by 1.4 per cent in Hong Kong, last trading at HK$115.60 (S$18.80) before it called for a trading suspension at 11.39am, on talks that the bid could be less than what the owners asked for.
OCBC is said to have offered less than the two times book value that Wing Hang was seeking, according to a Bloomberg report that cited unnamed sources.
Wing Hang has a network of 70 branches spanning Hong Kong, Macau and mainland China.
Its market capitalisation stands at about US$4.6 billion (S$5.8 million), which is roughly 1.7 times its estimated 2013 book value, based on data compiled by Bloomberg.
If the deal goes through, it will be the largest acquisition by a local bank since 2001 when DBS Bank bought another Hong Kong lender, Dao Heng Bank, for US$5.8 billion.