UOL divesting stake in UOB
The stable of companies belonging to Singapore's richest banker, Wee Cho Yaw, has been making headlines over the past few months. The latest news is that United Overseas Land (UOL) will be divesting its stake in United Overseas Bank (UOB).
Last Friday, UOL announced that it was selling its 4.2 percent stake in UOB at a minimum price of S$13.56. The minimum sale price for the UOB stake divestment is based on the average of the closing prices of UOB shares on the past five trading days.
The hotel and property group expects a net gain of about S$542 million from the divestment. It hopes to complete the sale within one year and distribute the proceeds in cash to its shareholders, who will get about 68 cents per share.
Trading in shares of UOL and OUB were both suspended on Friday at the request of the companies. UOB's shares were last traded at S$13.40, while UOL's were last traded at S$2.34.
UOL made the decision to divest after it accepted the recommendation of its financial adviser ING Bank to sell the stake in UOB.
As part of the selective rationalisation of UOL's assets -- which includes the sale of the UOB stake -- ING also recommended that UOL sell its other passive non-property investments.
For passive property investments -- specifically its stake in United Industrial Corp -- ING recommended that UOL either divest itself of the stake or lift its take to the level that would make it an associated firm.
The divestment of UOB by UOL will help to unravel Wee’s cross shareholding. While UOL holds 4.2 percent of UOB’s shares, UOB holds 49 percent of UOL’s. Analysts are already asking what Wee intends to do about the latter.
In April, UOB had announced a plan to sell a substantial part of its stake in UOL to its own shareholders at a price of S$1.58 per UOL share. The price had been 15 percent lower than UOL's last-traded price at the time of the announcement.
However, some of UOB’s shareholders had been unhappy with the plan, complaining that the price was too low, and would have resulted in an exceptional loss for the bank.
The situation became more complicated when the Singapore government’s investment holding firm Temasek Holdings subsequently put up a higher bid for UOL at S$2.06 per share, and then followed up with another even higher bid at S$2.26 per share.
Under the circumstances, UOB’s own plan fell through, while UOB itself rejected both of Temasek’s bids.
UOB needs to bring down its stake in UOL, along with the bank's other non-core businesses, to 10 percent by 2006 to comply with the regulatory requirements of the Monetary Authority of Singapore.
Wee is a shrewd businessman and he is naturally averse to selling any of his assets at less-than-fair value. This reluctance, however, has resulted in UOB being the slowest of the big three banks in bringing its non-core assets down to the required level.
With the economy and stock market in relatively good health, this may be a good time for UOB to pick up the pace in its divestment plan. Otherwise, should the economy and stock market turn down again, it might find itself forced to sell out at bargain prices.
Last Friday, UOL announced that it was selling its 4.2 percent stake in UOB at a minimum price of S$13.56. The minimum sale price for the UOB stake divestment is based on the average of the closing prices of UOB shares on the past five trading days.
The hotel and property group expects a net gain of about S$542 million from the divestment. It hopes to complete the sale within one year and distribute the proceeds in cash to its shareholders, who will get about 68 cents per share.
Trading in shares of UOL and OUB were both suspended on Friday at the request of the companies. UOB's shares were last traded at S$13.40, while UOL's were last traded at S$2.34.
UOL made the decision to divest after it accepted the recommendation of its financial adviser ING Bank to sell the stake in UOB.
As part of the selective rationalisation of UOL's assets -- which includes the sale of the UOB stake -- ING also recommended that UOL sell its other passive non-property investments.
For passive property investments -- specifically its stake in United Industrial Corp -- ING recommended that UOL either divest itself of the stake or lift its take to the level that would make it an associated firm.
The divestment of UOB by UOL will help to unravel Wee’s cross shareholding. While UOL holds 4.2 percent of UOB’s shares, UOB holds 49 percent of UOL’s. Analysts are already asking what Wee intends to do about the latter.
In April, UOB had announced a plan to sell a substantial part of its stake in UOL to its own shareholders at a price of S$1.58 per UOL share. The price had been 15 percent lower than UOL's last-traded price at the time of the announcement.
However, some of UOB’s shareholders had been unhappy with the plan, complaining that the price was too low, and would have resulted in an exceptional loss for the bank.
The situation became more complicated when the Singapore government’s investment holding firm Temasek Holdings subsequently put up a higher bid for UOL at S$2.06 per share, and then followed up with another even higher bid at S$2.26 per share.
Under the circumstances, UOB’s own plan fell through, while UOB itself rejected both of Temasek’s bids.
UOB needs to bring down its stake in UOL, along with the bank's other non-core businesses, to 10 percent by 2006 to comply with the regulatory requirements of the Monetary Authority of Singapore.
Wee is a shrewd businessman and he is naturally averse to selling any of his assets at less-than-fair value. This reluctance, however, has resulted in UOB being the slowest of the big three banks in bringing its non-core assets down to the required level.
With the economy and stock market in relatively good health, this may be a good time for UOB to pick up the pace in its divestment plan. Otherwise, should the economy and stock market turn down again, it might find itself forced to sell out at bargain prices.
<< Home