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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.
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.
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.
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The offer had come after a group of GEH minority shareholders in March raised concerns over GEH’s depressed share price and continued valuation decline over the last decade, despite its “strong financial position”.
In an attempt to “protect and preserve” shareholder value, the shareholders urged to table three resolutions at the insurer’s annual general meeting.
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 shareholders’ 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 response to the offer, the Securities Investors Association (Singapore) commended OCBC for its proactive response to feedback from minority shareholders of GEH.
Meanwhile, former remisier Ong Chin Woo, who led the group of minority shareholders, noted that the offer is lower than the 0.8 times its enterprise value he had appealed for.
On Friday, shares of OCBC closed 1.1 per cent lower at S$14.14, while shares of GEH closed 0.3 per cent lower at S$26.10, before the announcement.
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