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NRA Capital Pte Ltd

Written by: Lynn Look

Tuesday 21 Apr 2015

United Overseas Bank - press release

UOB finally succeeds in taking over FEB

Maintain BUY on UOB. UOB shares still offer an 8% upside to its fair value of S$26 compared to 3% for OCBC while DBS is overvalued by 20%.

In a statement yesterday, UOB said that its offer for Far Eastern Bank (FEB) shares it does not already own became unconditional following the receipt of valid acceptances representing some 90.21% of the offer shares.

Comments

UOB’s offer was conditional on it receiving more than 90% of the offer shares. Together with FEB shares already held by the group, UOB now holds 97.93% of FEB which means UOB can compulsorily acquire the remaining FEB shares owned by FEB shareholders who have not accepted the offer at S$3.51 apiece. FEB will then be folded into the UOB group and be delisted.

Previous attempts to privatise FEB in 1984 (@ offer price of S$1.80 each) and 1994 (@ offer price of S$3.95 each) were not successful due to the opposition of two influential shareholders – its former independent directors Lee Chin Chuan and Ong Chu Meng. Talks of mergers and possible buyouts in 1997 and 2004 also failed to materialise.  This time, however both Mr Lee and Mr Ong together with related parties owning 5.4% of FEB, gave irrevocable undertakings to sell their shares, finally sealing the fate of FEB, after more than three decades of wooing by UOB.

As mentioned in our earlier note dated 13 March 2015, FEB will not add much to UOB’s bottom-line but its integration into the group will help bring cost synergies and help the group better service its clients.

In another separate news in the Business Times today, it was reported that UOB had signed a financing agreement with Singapore based Royal GK to provide electricity to Myanmar. The 175,000 megawatt-hour (MWh) gas powered power plant will be completed middle of this year. UOB, together with OCBC, are the only two Singapore banks who received a foreign bank licence from Central Bank of Myanmar in October last year. A total of nine foreign bank licences were given out. Maintain BUY on UOB. UOB shares still offer an 8% upside to its fair value of S$26 compared to 3% for OCBC while DBS is overvalued by 20%.

 

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