Yahoo Finance SIAS writes to OCBC asking for clarity on its offer for GEH
SIAS asks for clarity on OCBC's unfair but reasonable offer for GEH in letter to OCBC chairman
SIAS has written to Andrew Lee, Chairman of the board of Oversea-Chinese Banking Corporation (OCBC) asking six questions about its final offer to Great Eastern Holdings G07’ minority shareholders. These are:
1. Can OCBC clarify whether its decision not to increase the offer price took into account the independent financial adviser's (IFA) opinion that the offer of $25.60 per share was "not fair but reasonable"?
2. Considering that GE has significantly contributed to OCBC's profits over the years, how does OCBC justify what is perceived as an "unfair" offer for the remaining 11.56% of GE shares? What are the key factors that led to the offer price of $25.60 per share, and how does it reflect the true value and potential of GE?
3. For the benefit of OCBC shareholders, please share when OCBC launched this voluntary unconditional general offer, was there a clear strategy and/or the intention to make GE a wholly owned subsidiary? Can OCBC clarify its strategic goal and outline its plan to achieve this goal? How does a VGO deemed unfair by the IFA allow OCBC to achieve its goal?
4. Has OCBC received feedback from its own shareholders regarding the potential reputation risks on this offer? How does OCBC intend to address these concerns?
5. In the offer document, it states, “The Offeror intends to seek a delisting of GEH from the SGX-ST if the Free Float Requirement is not met. The Offeror does not intend to support any action or take any steps to maintain the listing status of GEH in the event the Free Float Requirement is not met and the trading of the Shares on the SGX-ST is suspended”. However, SGX Regco has also required that “Exit offers in conjunction with voluntary delistings must not only be reasonable, but also be fair”. With the intention of delisting GEH, why did the board, despite knowing these requirements, choose not to improve the offer and provide a fair and reasonable offer?
6. If the trading is suspended due to the free float requirement not being met, will this issue become a permanent distraction to OCBC as management strives to execute the "One Group" strategy?
The Edge Singapore has contacted OCBC for its response.
Background to OCBC's unfair but reasonable offer
As background, on June 14, Ernst & Young Corporate Finance, the IFA to GEH’s independent directors that OCBC’s offer of $25.60 per GEH share for the shares it did not own was not fair but reasonable. The IFA said: "we are of the opinion that the financial terms of the Offer are, on balance, not fair but reasonable. Taking the factors we have considered, we advise the Independent Directors to recommend that Shareholders accept the Offer." Shortly later, OCBC announced that its $25.60 price is final and it extended the closing date to July 12.
SIAS says in a press release on June 21, that GEH’s minority shareholders point out that merely two weeks prior, the Monetary Authority of Singapore (MAS) updated its guidelines for financial institutions, underscoring the responsibility of boards and senior management to ensure fair dealing outcomes for customers.
“Whilst SIAS understands that there are also OCBC minority shareholders to be taken care of, but by choosing to adhere to an offer deemed "not fair", there is also a potential reputational risk formed by the investing community and/or consumers,” the SIAS press release says. SIAS adds that companies looking to delist in the future should offer a price that is both fair and reasonable.
Interestingly, market observers have suggested that OCBC’s offer for GEH, the latter’s upcoming delisting and the inability to receive a fair valuation as a listed entity possibly contributed to the reason for Income Insurance announcing that it is in discussions on a stake sale to Allianz. Not only will the Singapore Exchange S68 lose a listed life insurer but the delisting of GEH may also discourage other life insurance companies to list in Singapore.
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