ICBC may buy Wing Lung
Updated: 2008-03-21 15:28
Industrial and Commercial Bank of China Ltd (ICBC) and Standard Chartered Plc may bid for a majority stake in Hong Kong's family-controlled Wing Lung Bank Ltd, sources said.
Chairman Michael Wu and his family are considering selling their combined 53 percent stake, the company said in a statement to the Hong Kong exchange yesterday.
China Merchants Bank Co, China Construction Bank Corp and Australia and New Zealand Banking Group Ltd are also among possible suitors, the sources said, declining to be identified before a public announcement.
A takeover would be the first of a Hong Kong-traded bank in more than four years and may prompt other family-run lenders such as Wing Hang Bank Ltd to seek buyers. Under Hong Kong law, a buyer of the Wu family stake would be required to make a full tender offer for the 75-year-old bank, valued at $3.4 billion after surging 11 percent in local trading yesterday.
"A successful sale sends a good signal and may increase the availability of willing sellers," said Ivan Li, an analyst at Kim Eng Securities in Hong Kong. "It makes sense for mainland banks seeking to make inroads into international markets like Hong Kong, and they're more confident in doing so."
Wu, his extended family and associates together control 63 percent of the stock, according to the bank's 2007 annual report.
Shares of Wing Lung Bank jumped 9.4 percent on Wednesday before being suspended, after Apple Daily said the bank's major shareholders hired UBS AG and Credit Suisse Group to sell their stake. The stock closed at a record HK$114 yesterday after trading resumed.
A combination of rising employment, higher property prices and falling interest rates has driven a credit boom in Hong Kong. Lending rose 20 percent in January from a year earlier, according to the Hong Kong Monetary Authority.
Hong Kong's publicly traded, family-run banks include Wing Lung, Wing Hang Bank Ltd, Dah Sing Banking Group Ltd and Chong Hing Bank Ltd. All are valued at less than $4.1 billion. Bank of East Asia Ltd, controlled by the family of CEO David Li, has a market capitalization of $7.4 billion.
The city of 7 million people has 142 fully licensed banks. As bigger rivals like ICBC expand, smaller family-run lenders may struggle to stay independent, said Wayne Yu, an associate finance professor at Hong Kong Polytechnic University.
"Size is everything, global reach is the name of the game," said Yu. "The end is coming for many family-owned banks. How long it will take will depend on their determination to keep going."
Wing Lung, established in 1933 as Wing Lung Ngan Ho, suspended operations in Hong Kong when the territory was occupied by the Japanese in 1941 and resumed business in the city in 1945.
The company went public in 1980, and set up its first overseas branch in California four years later. It entered the mainland in 1994 by setting up a representative office in Guangzhou.