[SINGAPORE] When Great Eastern Holdings (GEH) and its controlling shareholder OCBC put forward a two-pronged plan last week to resolve the insurer’s trading suspension, I was impressed and rather surprised that a seemingly impossible deal had been struck.
The first part of the plan is for GEH to attempt delisting its shares from the Singapore Exchange, with OCBC providing an exit offer of S$30.15 per share. If the delisting resolution is voted through by GEH’s minority shareholders, OCBC will stump up nearly S$900 million to purchase the 6.28 per cent of the insurer it does not already own.
This is quite a turnabout for OCBC. Last year, it offered to pay S$1.4 billion – or S$25.60 per share – for the 11.56 per cent of GEH it did not own. It refused to raise its offer price even after the independent financial adviser (IFA) appointed by GEH said the deal was “not fair, but reasonable”.
At OCBC’s annual general meeting (AGM) on Apr 17, its board defended the decision to stand firm behind the offer price of S$25.60 per share, stating that the offer price was based on professional advice.
OCBC is now offering to pay nearly 17.8 per cent more “at the request of GEH” in order to facilitate the delisting of the insurer.
The second part of the plan put forward by GEH and OCBC last week is an ingenious proposal to restore the insurer’s free float and lift the trading suspension on its shares – if the delisting resolution is not voted through by minority shareholders.
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GEH will undertake a one-for-one bonus issue of new shares, and allow its shareholders to elect to receive their entitlement in the form of newly created Class C non-voting shares. These Class C shares will rank equally with GEH’s ordinary shares in respect of dividends and distributions, but they will not be listed.
OCBC has said it will support the resolutions for GEH to issue the bonus shares, and adopt a new constitution to permit the issuance of the Class C shares.
At the request of GEH, OCBC will also elect to receive the Class C shares in lieu of the ordinary bonus shares. With this concession, OCBC’s stake in GEH will be diluted from 93.72 per cent to 88.19 per cent, thus restoring the insurer’s free float and paving the way for trading to resume.
Temporary reprieve?
The proposals unveiled last week seemed like a victory for minority shareholders of GEH.
After holding out against OCBC’s lowball offer and braving an 11-month trading suspension, they will soon have some certainty – GEH will either be delisted with an exit offer of S$30.15, or trading in its shares will resume.
Some of GEH’s minority shareholders might be torn between which of these outcomes they prefer, though.
While the exit offer of S$30.15 per share has been deemed “fair and reasonable” by GEH’s IFA, and is more than what OCBC offered to pay last year, it is still less than what some minority investors believe their shares to be worth.
In particular, the exit offer is well below the insurer’s embedded value as at end-2024 of S$38.08 per share. It is, however, 1.6 times the net asset value and 14.3 times earnings.
On the other hand, there is no guarantee that there will be a healthy market for GEH shares if the trading suspension is lifted. Following OCBC’s offer last year, GEH’s shareholder base has shrunk considerably – it had only 838 shareholders as at Mar 5, 2025, down from 3,466 as at Mar 5, 2024.
More to the point, the announcement last week plainly stated that OCBC’s strategic intention is to delist GEH. In fact, OCBC will have the right to convert GEH’s Class C shares into ordinary shares after five years – which could well result in the insurer being suspended from trading again.
So, will the possible lifting of GEH’s trading suspension be just a temporary reprieve? GEH’s chief financial officer Ronnie Tan would not speculate about OCBC’s intentions. “Our collective goal is to resolve the trading suspension situation,” he said.
He added: “We believe that five years demonstrates a sufficiently long commitment on OCBC’s part to support the continuation of trading. There could be changes in market conditions and regulations during that time, and the structure provides flexibility in that context.”
Continued minority pressure?
This column said last year that the interests of OCBC and GEH’s minority shareholders are fundamentally misaligned. While minority investors see value in GEH’s shares, OCBC has no incentive to take any action to boost the insurer’s share price.
Most of GEH’s minority shareholders are probably well aware of this, and fully prepared to live with the consequences. But it does not mean that they will not try to push for change.
Last year, a group of minority investors attempted to table three resolutions at GEH’s annual general meeting (AGM) to improve the market valuation of its shares.
The resolutions were for the insurer to withhold 30 per cent of its directors’ fees until its share price recovered to 0.8 times its embedded value; to use GEH shares in its share-based compensation schemes, instead of OCBC shares; and to appoint an IFA to explore options to enhance shareholder value.
Those resolutions were eventually not tabled. Two weeks after the AGM, however, OCBC launched its offer for GEH at S$25.60 per share.
Looking back at this chain of events, some market watchers might find it ironic that GEH has now persuaded OCBC to provide an exit offer of S$30.15 per share – which is almost equivalent to 0.8 times the insurer’s embedded value.
If GEH remains listed, its minority shareholders are unlikely to stop pressuring the board to address the market valuation of its shares. Among other things, they may well press the insurer to overhaul its share-based compensation practices, and examine the feasibility of significantly widening its free float.
The likelihood of such initiatives being pursued seems remote, of course, given that they are not in the interest of GEH’s controlling shareholder.
Yet, only a year ago, OCBC did not seem interested in paying more for GEH’s shares or maintaining the insurer’s free float. Now, it has decided to bring much needed resolution to the matter.
If GEH remains listed, perhaps OCBC will decide that other matters need to be similarly resolved.
The writer owns shares in Great Eastern as well as OCBC
