OCBC To Raise Fresh Capital After Wing Hang Acquisition; Sets Rebrand Launch Date

Tom Burroughes

19 August 2014

Singapore-listed has announced a rights issue to raise around S$3.3 billion ($2.65 billion) after acquiring Wing Hang Bank late last month. The added funds will bolster the bank’s capital strength.

The bank, which is also parent of , the private bank, announced what it called a “renounceable underwritten rights issue” of up to 440,047,710 new shares to raise the money.

It also unveiled a new name and logo for the acquired business - OCBC Wing Hang – taking effect from 1 October at all touch points in Hong Kong and Macau, OCBC said in a statement late yesterday. The renaming of WHB China will happen at a later time, the bank said.

The development takes place after what had been a relatively drawn-out battle to secure ownership of Wing Hang as OCBC sought to expand its status as a large bank in the region. (For more on the issue, see here.) The deal is also a sign of continued M&A activity in banking around the world, as some firms exit markets where they lack scale while others try to boost market share and economies of scale.

“The successful acquisition of WHB empowers OCBC Bank to further execute its Greater China strategy of accelerating growth in the areas of wealth management and retail and commercial banking,” OCBC said. It continued: “This will be achieved by leveraging the combined resources of the OCBC group of companies in banking, wealth management and asset management.”

Wing Hang Bank and its subsidiaries give OCBC a larger Greater China platform comprising a total of 120 branches and offices spanning Hong Kong, Macau, China and Taiwan. Within China, OCBC Bank‟s network has increased from 16 banking branches and sub-branches to 31.

Rights issue fine print
The rights issue will be offered on the basis of one rights share for every eight existing shares held by entitled shareholders as at 5.00pm the books closure date, disregarding fractional entitlements. At S$7.65 for each rights share, the issue price represents a discount of 25 per cent to the closing price of $10.20 per share on 15 August 2014.

OCBC said it has secured irrevocable undertaking from Selat (Pte) Limited to subscribe for and/or procure that various shareholders in the Lee Group Companies (including Singapore Investments Limited, Lee Foundation and Lee Rubber Company subscribe for their full entitlement, amounting to 117,299,423 rights shares or approximately 26.7 per cent of the rights issue. The remaining rights shares, representing around 73.3 per cent of the rights issue, have been jointly underwritten by Merrill Lynch (Singapore), The Hongkong and Shanghai Banking Corporation, Singapore Branch; and JP Morgan (S E A).

OCBC Bank has, through its wholly-owned subsidiary OCBC Pearl Limited, acquired shares or received acceptances of the offer totalling 300,731,090 WHB shares, representing about 97.52 per cent of the issued share capital of WHB.

The total cash consideration paid or payable for the transaction amounts to HK$38.723 billion (around $4.997 billion). OCBC Bank has previously undertaken capital management exercises to augment its capital position, including issuances of Basel III compliant Tier 2 subordinated debt in April and June amounting to US$2 billion.

“The S$3.3 billion from the rights issue will enable OCBC Bank to strengthen its balance sheet and enhance its financial flexibility following the successful completion of the acquisition of WHB,” the statement said.

Affluent strategy
For WHB‟s affluent customers, OCBC Bank will introduce “holistic” wealth advisory services offering a full suite of wealth products from unit trusts to bonds, and from structured deposits to equity – using WHB‟s branch network across Hong Kong, Macau and China.

This network concurrently extends offshore market access for OCBC Bank‟s customers beyond Singapore, Malaysia and Indonesia.

OCBC Bank will similarly promote and develop offshore banking solutions for WHB‟s customers, its statement said.

“Individuals will gain from OCBC Bank‟s comprehensive approach towards wealth management that includes discretionary portfolio management and holistic wealth advisory services, and a broadened spectrum of wealth products and solutions, both onshore and offshore. Affluent and high net worth individuals will have access to Bank of Singapore‟s open-architecture global product platform and world-class research team, as well as OCBC Premier Banking Centres in the region,” it said.