UOB seeks full control of Far Eastern Bank.
Majority owner's offer comes after failed bids that go as far back as 1984
UOB says it took into account the valuation of Far Eastern Bank Building, a main asset of Far Eastern Bank in Cecil Street, when it set its offer price of $3.51 for all outstanding FEB shares. -- ST PHOTO: AZIZ HUSSIN
AFTER a lengthy courtship that saw its advances continually rebuffed, United Overseas Bank (UOB) could finally take full control of Far Eastern Bank (FEB).
It is offering $3.51 for all outstanding FEB shares - a price that is 80 per cent above FEB's net asset value per share of $1.95 at the end of last year.
UOB said on Wednesday when announcing the buyout that it took into account the valuation of Far Eastern Bank Building, a main asset of FEB in Cecil Street, when it set its offer price.
The building's market value was put at $167 million as of Jan 13, while the net book value of the property was $3.72 million.
UOB is the majority owner of FEB, with a huge 78.9 per cent stake in the lender. Its offer is contingent on it receiving more than 90 per cent of the shares.
It said it intends to privatise and make FEB its wholly owned unit where it will integrate the small lender's operations into its own larger network.
Minority shareholders will also benefit, said UOB, as they have a chance to unlock the value in their unlisted and illiquid shares.
If all minority shareholders sell up, it would cost UOB about $74.2 million to fully own the small lender, which has one branch.
An independent financial adviser, Provenance Capital, has recommended the offer to shareholders.
Previous attempts to privatise FEB had been unsuccessful due to the opposition of two influential shareholders - former independent directors Lee Chin Chuan and Ong Chu Meng.
As early as 1984, UOB made a general offer to buy all FEB shares after it picked up a 50.1 per cent interest in the bank after it had run into difficulties.
While FEB's financial advisers recommended that minority shareholders accept UOB's offer of $1.80 apiece, both Mr Lee and Mr Ong advised against it.
Over the years, UOB has ramped up its stake in FEB. It made another offer in 1994 of $3.95 for each FEB share, but it was again rejected by Mr Lee and Mr Ong. Talks of mergers and possible buyouts in 1997 and 2004 failed to materialise into a successful transaction.
Things could be different this time as both Mr Lee and Mr Ong, together with related parties owning some 5.4 per cent of FEB, have given irrevocable undertakings to sell their shares.
Analysts that The Straits Times spoke to, who declined to be named, said the offer could have been made now as sentimental reasons for holding on to the FEB shares have probably dissipated over the years.
Cold, hard calculations likely also factored in the considerations. One shareholder noted the limited upside, with FEB distributing just two cents per share in dividend for what has been described as the longest time.
A small operation means net profit after tax declined from $6.6 million in 2003 to $3.8 million in 2009 and further down to $1.9 million last year. In contrast, UOB posted a record $3.25 billion profit last year.
Far Eastern Bank Building's lease and, consequently, its value are also running down with each passing year. The building was completed in 1974 and the lease on the site started in 1969.
UOB will fund the acquisition through internal cash resources, perhaps a small price to pay for a long-held plan.
The Straits Times / Money Published on Sat, 14 March 2015
UOB says it took into account the valuation of Far Eastern Bank Building, a main asset of Far Eastern Bank in Cecil Street, when it set its offer price of $3.51 for all outstanding FEB shares. -- ST PHOTO: AZIZ HUSSIN
AFTER a lengthy courtship that saw its advances continually rebuffed, United Overseas Bank (UOB) could finally take full control of Far Eastern Bank (FEB).
It is offering $3.51 for all outstanding FEB shares - a price that is 80 per cent above FEB's net asset value per share of $1.95 at the end of last year.
UOB said on Wednesday when announcing the buyout that it took into account the valuation of Far Eastern Bank Building, a main asset of FEB in Cecil Street, when it set its offer price.
The building's market value was put at $167 million as of Jan 13, while the net book value of the property was $3.72 million.
UOB is the majority owner of FEB, with a huge 78.9 per cent stake in the lender. Its offer is contingent on it receiving more than 90 per cent of the shares.
It said it intends to privatise and make FEB its wholly owned unit where it will integrate the small lender's operations into its own larger network.
Minority shareholders will also benefit, said UOB, as they have a chance to unlock the value in their unlisted and illiquid shares.
If all minority shareholders sell up, it would cost UOB about $74.2 million to fully own the small lender, which has one branch.
An independent financial adviser, Provenance Capital, has recommended the offer to shareholders.
Previous attempts to privatise FEB had been unsuccessful due to the opposition of two influential shareholders - former independent directors Lee Chin Chuan and Ong Chu Meng.
As early as 1984, UOB made a general offer to buy all FEB shares after it picked up a 50.1 per cent interest in the bank after it had run into difficulties.
While FEB's financial advisers recommended that minority shareholders accept UOB's offer of $1.80 apiece, both Mr Lee and Mr Ong advised against it.
Over the years, UOB has ramped up its stake in FEB. It made another offer in 1994 of $3.95 for each FEB share, but it was again rejected by Mr Lee and Mr Ong. Talks of mergers and possible buyouts in 1997 and 2004 failed to materialise into a successful transaction.
Things could be different this time as both Mr Lee and Mr Ong, together with related parties owning some 5.4 per cent of FEB, have given irrevocable undertakings to sell their shares.
Analysts that The Straits Times spoke to, who declined to be named, said the offer could have been made now as sentimental reasons for holding on to the FEB shares have probably dissipated over the years.
Cold, hard calculations likely also factored in the considerations. One shareholder noted the limited upside, with FEB distributing just two cents per share in dividend for what has been described as the longest time.
A small operation means net profit after tax declined from $6.6 million in 2003 to $3.8 million in 2009 and further down to $1.9 million last year. In contrast, UOB posted a record $3.25 billion profit last year.
Far Eastern Bank Building's lease and, consequently, its value are also running down with each passing year. The building was completed in 1974 and the lease on the site started in 1969.
UOB will fund the acquisition through internal cash resources, perhaps a small price to pay for a long-held plan.
The Straits Times / Money Published on Sat, 14 March 2015
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