OCBC stands by its Great Eastern offer, says it represents a ‘meaningful premium’

SINGAPORE – OCBC said on June 27 that its offer price of $25.60 a share in the bid to take its insurance arm Great Eastern Holdings private represents a “meaningful premium” for shareholders.

OCBC made a $1.4 billion bid on May 10 to take GE private following shareholder unhappiness over falling returns.

Independent financial adviser Ernst & Young Corporate Finance has since labelled the offer “not fair but reasonable”, while the Securities Investors Association (Singapore), or Sias, urged OCBC to consider shareholder requests to table three proposed resolutions concerning the undervaluation of Great Eastern shares.

OCBC head of investor relations Collins Chin noted in a statement to the Singapore Exchange (SGX) that the offer price is at a 36.9 per cent premium to the last traded price and a 41.9 per cent premium to the six-month volume weighted average price.

“We continue to believe that the offer represents a meaningful premium to the last traded prices of the shares,” he said.

Mr Chin added in the SGX statement that OCBC notes that Ernst & Young Corporate Finance regards the offer as “not fair but reasonable” and pointed to its advice that GE shareholders still accept it.

He added that there has been a “strong synergistic relationship” between OCBC and GE over the years, with GE significantly contributing to OCBC’s performance while OCBC provided the insurer access to its retail and commercial customer base.

“This access has been valuable as one of the drivers of GE’s growth and profitability,” Mr Chin said.

He added that OCBC’s intention to increase its investment in GE is not new. The bank first made an offer in 2004, then again in 2006. It made the offer in May with a view to seek a delisting.

“While our intention is clear, we have to be prudent and calibrated in our approach, while striking a balance between cost and returns,” Mr Chin said.

He noted that OCBC can only delist GE if the conditions are acceptable and in the interests of OCBC and its shareholders.

“The listing status of GE shares does not affect the close relationship between OCBC and GE, who already share a synergistic relationship, and is part of our ‘One Group’ strategy to customise a full suite of integrated solutions for our customers,” he said.

“The offer also enables OCBC to improve our return on equity and optimise our capital to enhance shareholder returns.”