SINGAPORE: Singapore’s second- biggest lender, OCBC, on Friday ( May 10 ) announced a S$ 1.4 billion ( US$ 1.04 billion ) offer to buy the remaining stake in insurer Great Eastern Holdings, with the aim of delisting the company.
OCBC, Great Eastern’s biggest investor, said it would get the 11.56 per cent interest in the underwriter that it does not already own. The borrower will own the entire stake in the business if the agreement is successful.
The present value of S$ 25.60 per share represents a subscription of 36.9 per share over Great Eastern’s last traded amount of S$ 18.70, the bank said in a media release.
The firm requested a exchanging halt of stocks immediately after OCBC’s statement. The stock rose as much as 39 percent before closing at S$ 25.72, off 37.5 % for the day, during the day trading session on Friday. The final value was at its highest level since July 2019 for the counter.
OCBC noted that its most recent action is intended to strengthen its core business pillars, including plan, money management, and finance, as well as optimize its capital to increase shareholder returns.
Wonderful Eastern’s proximity to OCBC further strengthens its long-term goal of becoming the dominant player in wealth management, it added.” In a rapidly expanding region that has seen rising demand for products and solutions, we have seen increasing demand for products and solutions for enhancing and conserving wealth.
OCBC noted that the employer has contributed an average of S$ 700 million in gross income to OCBC over the past ten years, and that the acquisition is anticipated to contribute to earnings, according to OCBC. Over the course of this time, this represents an average of 15 % of OCBC’s annual net income.
Great Eastern’s profit contribution increased by 28 % over the previous quarter’s end in March to S$ 260 million, thanks to improved investment performance and improved claims experience.
OCBC added that this presented a chance to “deploy its funds to provide its owners with better results.”
The borrower has for the past 20 years owned the majority of Fantastic Eastern. In 2004, and 2006, it recently made an offer to increase its purchase in the employer.
In response to questions about the timing of its most recent offer, OCBC Group CEO Helen Wong described it as” a natural move” as the bank works to strengthen its wealth management proposition, which includes insurance as a “very important pillar.”
Ms. Wong added that the decision was unaffected by recent concerns raised by the company’s majority shareholders regarding the company’s continuing decline in value and share prices.
At a press conference held to announce the bank’s quarterly results, she said,” Our strategy is always to strengthen the wealth management command position, so acquiring more stocks in Great Eastern is an continuous practice.”
” But as we said, we generally look at our money position, how to best utilize it and this is one of the options”.
When asked why the present was seen as its preferred method of money distribution, Ms. Wong responded that the lender is positioned for long-term growth.
” If you just pay out dividends to your shareholders, then you wo n’t have the capital for future opportunities to grow”, she told reporters and analysts present at the briefing. We want to see long-term, green development.
The acquisition of Great Eastern even presents potential more synergies, with little “integration dangers”, given how the employer has been piece of OCBC’s secure of businesses for decades, the CEO added.