OCBC’s privatisation bid for its insurance arm Great Eastern Holdings (GEH) is not fair but reasonable, the independent financial adviser (IFA) to the deal said on Friday (Jun 14).
The IFA said the financial terms of the offer are “on balance, not fair but reasonable”, and advises the independent directors to recommend that shareholders accept the offer.
After the IFA recommendation was put out, OCBC said in a separate announcement that its offer price was final and that it does not intend to increase it.
In May, OCBC made a voluntary unconditional general offer of S$1.4 billion for the remaining 11.56 per cent stake in GEH that it does not own, with the aim to delist the insurer.
The lender expects the privatisation to strengthen its business pillars of banking, wealth management and insurance, as well as optimise its capital to enhance shareholder returns.
The offer price of S$25.60 per share represents a 36.9 per cent premium over GEH’s last traded price of S$18.70 before the offer announcement.
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It is, however, at a 30 per cent discount to GEH’s embedded value per share of S$36.59 as at Dec 31, 2023.
OCBC’s offer for GEH had come after a group of the insurer’s minority shareholders, led by former remisier Ong Chin Woo, raised concerns over GEH’s depressed share price and continued valuation decline over the last decade.
In an attempt to “protect and preserve” shareholder value, the shareholders urged to table three resolutions at the insurer’s annual general meeting in April.
These were calls to withhold directors’ fees until GEH’s share price recovers to 0.8 times its embedded value; to replace OCBC shares in GEH’s current executive share option schemes with GEH shares; and to appoint an IFA to explore options to enhance shareholder value.
While the resolutions were not tabled due to legal reasons, GEH discussed the concerns at the meeting, and its chairman appealed for shareholders to remain patient as the board works on boosting returns.
In a statement after the release of the IFA report, Ong said he “(feels) affirmed by the IFA’s statement that the offer is ‘not fair’”.
“We acknowledge OCBC’s right to maximise its self-interests within legal boundaries,” Ong said.
“However, we believe that in accordance with principles of good corporate governance and leadership, OCBC could have done more for GEH minority shareholders, who are essentially its ‘junior partners’ in the insurance business.”
Ong is hoping for an amicable resolution to the deal, and advises other shareholders to consider the IFA’s recommendations and consult with their financial advisers before making any decisions.
“Personally, I intend to retain some GEH shares as a commemoration of this significant journey we have walked together, even if GEH is delisted,” he added.
Ernst & Young Corporate Finance (EY) was the IFA appointment for the deal.
On Friday, shares of OCBC closed 1.1 per cent lower at S$14.14, while shares of GEH slipped 0.3 per cent to S$26.10, before the announcement.
