Singapore's DBS in deal to acquire H.K. bank Dao Heng

Asian Economic News, April 16, 2001

SINGAPORE, April 11 Kyodo

(EDS: ADDS CLARIFICATIONS FROM DBS SPOKESMAN)

The Development Bank of Singapore (DBS), Singapore's biggest bank, said Wednesday it has forged a deal to acquire Hong Kong's Dao Heng Bank.

A statement issued by DBS said it will launch a voluntary conditional offer for all shares of Dao Heng.

Guoco Group Ltd., which holds 71.3% of Dao Heng, has given an irrevocable undertaking from Guoco Group to sell its shares as part of the deal.

In a press conference held simultaneously in Singapore and Hong Kong by videoconference, DBS Chairman S. Dhanabalan said DBS has reached an in-principle agreement with Guoco Group to acquire an initial 80% of Dao Heng for S$7.6 billion (about US$4.2 billion).

In addition, it will acquire the remaining 20% of Dao Heng through a put and call option that is to be exercised by the end of next year for S$2.4 billion.

A DBS spokesman clarified later than Dhanabalan, in his comments, was referring to DBS spending S$7.6 billion to S$7.7 billion to acquire 80% of the holding owned by Guoco Group, not 80% of all Dao Heng shares.

He said that while the amount for acquisition of the Guoco holding is firm, the actual cost of exercising the options for the remaining Guoco shares could fluctuate somewhat from the expected S$2.4 billion.

Shareholders of Dao Heng will have a choice of accepting either HK$60.14 (US$7.71) per Dao Heng share in cash, or a cash and share combination of HK43.26 in cash and one share in unlisted DBS Diamond Holdings, a Bermuda acquisition company wholly owned by DBS.

Dhanabalan said the move will make DBS the fourth largest bank in Hong Kong in terms of assets.

DBS already owns DBS Kwong On Bank in Hong Kong, and the combination of DBS Kwong On and Dao Heng will make the two the fourth largest bank in Hong Kong by assets after Hong Kong and Shanghai Bank, the Bank of China and Standard Chartered Bank.

However, the two banks will be run separately for the next 18 months to two years. Only after the completion of the put-call arrangements will the process of legal integration begin between the two banks.

The transaction is expected to be completed in the third quarter of this year.

The purchase will be funded largely from existing DBS capital.

DBS already has subsidiaries in Hong Kong, the Philippines, Indonesia and Thailand.

''This move...will allow us to fully realize one of the key stages in our journey to become one of the best banks in Asia by establishing a major presence in Hong Kong,'' Dhanabalan said. ''We see Hong Kong as the second hub of our Asian presence alongside our already substantial position in Singapore.''