I represent a group of OCBC shareholders. We refer to the article “GEH, OCBC’s proposals a victory of sorts for minorities who have held out, endured suspension” (BT, Jun 9) and were surprised by Ben Paul’s suggestion that OCBC will move to meet Great Eastern (GE)‘s minority shareholders’ demands if the insurer remains listed.
While Ben Paul has declared himself as a shareholder of both OCBC and GE, he seems to have ignored the need for the bank to protect the interests of its shareholders.
We do not want OCBC to overpay for GE. Last year’s offer at S$25.60 was already a 37 per cent premium over GE’s last traded price of S$18.70. OCBC was also not buying a controlling stake in GE as it had already owned over 88 per cent in May 2024.
The independent directors of GE, on the advice of an independent financial adviser (IFA), had advised minority shareholders to accept OCBC’s offer, after all the factors have been considered.
After the general offer last year, OCBC pulled in an additional 5 per cent or so of GE shares.
This is a prudent move, and from our point of view, a smart one, made in the interests of the over 125,000 of OCBC shareholders. At OCBC’s AGM this year, we applauded OCBC chairman Andrew Lee for what he said: “We are not a small-time business where we can raise (the offer price) as we like. We have governance, we have process…The Board has exercised its fiduciary duty in keeping strictly to the process. That is the balance and prudence that we as directors of OCBC have practised.”
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As OCBC shareholders, we are behind the bank’s strategy to strengthen itself as an integrated financial services group to better synergise its businesses. As opposed to a pure banking play, an integrated financial services model will unlock more value for us over the long term. The idea of distributing GE shares to us should therefore not be entertained as it would be a senseless hollowing out of a good bank.
OCBC’s current exit offer for GE is clearly not its own wish. It was made at the request of GE, to help it get out of a limbo marked by months of trading suspension and repeated extensions granted by the bourse operator to find palatable solutions.
It is a conditional exit offer which is different from last year’s unconditional general offer. As a parent company of GE, OCBC is likely expected by regulators to help GE comply with the listing rules.
The IFA to the deal, EY, has said the current offer is “fair and reasonable”, while some have continued to point out that the offer at S$30.15 per share is lower than the insurer’s embedded value of S$38.08 per share as at end-2024.
What has been consistently missing in the news reports is the simple fact that the embedded value depends to a significant extent on OCBC being a distributor of GE’s products.
A look through GE’s financials will show that bancassurance accounted for more than a quarter of the insurer’s total weighted new sales in FY2024.
In fact, it is in OCBC shareholders’ interests to start charging fair value for the exclusive use of the bank to sell the insurer’s products.
Make no mistake that if this nuclear option were taken, GE’s embedded value would be far lower than that of S$38.08 per share.
But this is an option that the bank has steered clear of then – and now.
For the BT writer, it would probably make no consequential difference if GE’s embedded value falls. Such would not be the case, however, for GE shareholders who do not also own OCBC shares. The writer should acknowledge that for him to push one narrative may benefit him but hurt other GE shareholders.
Given the fundamentals of the situation, there really is no incentive for OCBC to up its offer last year. There is also little motivation for OCBC to make another general offer in the foreseeable future if the GE delisting fails on Jul 8.
It goes without saying that the interests of the 125,000 OCBC shareholders have to be represented by OCBC, and we believe the bank has done so. More importantly, the 800 or so GE shareholders cannot expect OCBC to consider their interests alone. That is the responsibility of GE and its board.
Jonathan Kuek
