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Flames of Singapore's Banking Shake-Up Raging
Flames of Singapore's banking shake-up is raging as the country's big banks are engaging themselves in efforts for merger and takeovers.
The government-linked DBS Group Holdings Friday launched a 9.4 billion takeover bid for Overseas Union Bank (OUB), a move which constitutes the biggest-ever corporate takeover on the local scene.
DBS, Singapore's No.1 bank and Southeast Asia's largest bank, is offering 0.61 DBS shares and 1.14 Singapore dollars (about 0.63 US dollars) in cash for every share in the bank of OUB built up and controlled by 96-year old banker Lien Ying Chow.
If DBS succeeded in its cash-and-shares offer for OUB, a combined DBS-OUB, together with its previous purchase of Hongkong' s Dao Heng bank at a cost of about 10 billion Singapore dollars ( about 5.5 billion US dollars) about two months ago, will lift DBS's total assets to 194 billion Singapore dollars (about 107 billion US dollars) and strengthen DBS's No 1 position in the home market.
The deal will also make DBS Asia's third largest bank outside Japan and Australia and give it a foothold in Malaysia where it has no presence.
It is noteworthy that DBS Group offered to pay at 1.83 times book value in its unsolicited bid for OUB while it paid more than three times book value for Dao Heng.
DBS's share-and-cash offer to buy all of OUB came on the heels of the Overseas Chinese Banking Corporation's (OCBC) unsolicited 4. 8 billion Singapore dollar (about 2.64 billion US dollars) cash bid for Keppel Capital which totally owns the Keppel-DaLee bank, the fifth largest bank in Singapore.
If the cash offer goes through, the takeover will make OCBC Singapore's second largest bank with a combined assets of 85.7 billion Singapore dollars (about 47.2 billion US dollars), leaving Singapore's current No.2 United Overseas Bank (UOB) trailing far behind at 66 billion Singapore dollars (about 36.3 billion US dollars).
Report has said the UOB has not resigned to being outdone by asserting it has long had interest in acquiring the Keppel Capital.
The latest takeover moves taken by DBS and OCBC respectively appeared to be delayed reform action, coming more than three years later after the government initiated its new round of financial sector reforms aimed at promoting liberalization in domestic banking sector and strengthening Singapore's banking system and local banks, as well as at enhancing Singapore's position as an international financial center.
In line with its reform plan in the banking sector in 1998, government made DBS acquire the state-owned specialized saving bank, the Post Office Savings Bank, and helped the Keppel Bank, another government linked bank, merge with the DaLee bank into Keppel-DaLee Bank.
Again in 1999, the Government made it clear that Singapore had room for only two big banks but nothing stirred until last week when the OCBC startled the market with an unsolicited bid for Keppel Capital. This was said because the UOB, OCBC and OUB have a family-controlled background in their grown-ups.
The takeovers by no means are done deals but the government has said that it has no objection to any offer for merger and takeover if the offer will not affect financial performance.
The pace of Singapore's banking shake-up quickened dramatically with recent takeover offers in the financial sectors and Singapore's efforts for merger and acquiring in other sector can also be easily witnessed.
The Singapore Telecommunications Company (SingTel) has launched a takeover offer for Cable & Wireless Optus in Australia and the Singapore Airlines has bid to lift significantly its stake in Air New Zealand. All this has testified Singapore's goals and efforts to build companies of world class to enhance its competitiveness.
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