[SINGAPORE] OCBC has made a S$900 million conditional exit offer at S$30.15 per share for the 6.28 per cent stake in Great Eastern it does not own, in a bid to delist the insurer.
The offer, which OCBC said on Friday (Jun 6) was made “at the request of Great Eastern”, will resolve the latter’s 11-month suspension in share trading, while “providing its shareholders an exit at a fair and reasonable price”.
Independent financial adviser (IFA) to the deal EY said this offer is fair and reasonable.
The offer comes months after OCBC first made a voluntary unconditional general offer of S$1.4 billion for the remaining 11.56 per cent stake in Great Eastern that it did not already own, with the aim to delist the insurer.
OCBC had earlier said its previous offer of S$25.60 per share was final.
OCBC’s new exit offer is conditional – at least 75 per cent of the total number of issued shares held by Great Eastern shareholders need to vote in favour of a delisting resolution, which the insurer will table at an extraordinary general meeting.
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OCBC will not be able to vote on the resolution.
If the delisting resolution is passed, Great Eastern will be delisted from the Singapore Exchange (SGX) and shareholders who accept the exit offer will be paid, while those who do not accept the offer will remain as shareholders owning shares in the unlisted insurer.
OCBC said its exit offer price is final, and it has no intention of launching another offer in the foreseeable future.
One-for-one bonus issue
If the delisting resolution is not passed, the exit offer will lapse and Great Eastern will propose a resolution to satisfy the free float requirement.
This includes a one-for-one bonus issue resolution comprising new ordinary shares – which will be listed and carry voting rights – and newly-created Class C non-voting shares – which will not be listed and have no voting rights.
These shares will be issued at no consideration from shareholders, and will be entitled to the same dividends. All shareholders will receive the bonus shares unless they elect to receive the Class C non-voting shares.
OCBC said it will be able to vote on the bonus issue resolution, and intends to vote in favour of it and opt to receive the Class C non-voting shares.
This will dilute the lender’s own shareholding of voting shares in Great Eastern to 88.19 per cent, but keep its 93.72 per cent stake in the economic interests in the insurer, since the non-voting shares rank equally with all ordinary shares.
Speaking to media on Friday morning, Great Eastern chief financial officer Ronnie Tan said the proposal was made in the interests and views of the minority shareholders.
“While there are two pathways, we put the delisting pathway upfront as the first decision… to prioritise the views of minority shareholders – meaning minority shareholders have the first say as to whether they want Great Eastern to be delisted or to remain listed,” he said.
“The company and Great Eastern’s board recognised that prolonged trading suspension is not in shareholders’ interest, and we need to find a solution as soon as we can,” he added.
Tan also addressed some issues circulating on social media regarding the deal.
On why Great Eastern did not conduct a selective capital reduction (SCR) when OCBC first made the offer, Tan said it was “just not possible” due to regulations, as the offer was made under the Takeover Code.
Great Eastern would also require OCBC’s support, as the SCR would be paid out by the insurer.
Tan said SCRs have an unintended consequence: by using the insurer’s own capital to pay for it, it will reduce its capital position and solvency ratio.
“Why do we want to solve one problem and create another problem, no matter how small it is?” he noted.
The company had voted against the SCR option, believing that the exit offer from OCBC is “a better decision for the company”, he said.
Tan also addressed the issue of taking nine months to appoint a new financial adviser to the deal, saying it was so that the insurer could speak to “as many people as (it could) to get ideas”.
“It was quite intentional; we did not want to rush to appoint a financial adviser because we want the idea flow to keep coming,” he said.
Of all the investment banks that Tan spoke to, he noted that their solutions broadly fell into the two options: either to delist, or resume trading.
“The aha moment came (to us): what if we take the best option from the delisting category, and we take the best option from the resumption of trading category, and we put them together into a comprehensive proposal, and then we let shareholders vote,” he said.
Tan said the insurer has not spoken to any shareholders yet, but noted that they may reach out to the financial adviser since the announcement of the offer has been made.
OCBC chief executive Helen Wong said in a joint statement the lender has “never wavered in our strategic intention to delist Great Eastern”.
The new offer is “made to avail to Great Eastern shareholders the opportunity to exit the stock after an 11-month suspension in share trading”, she said.
“We have carefully considered the decision. We are therefore making a fair and reasonable offer, to comply with listing rules, to support Great Eastern’s proposal to delist,” she added.
OCBC’s original offer was deemed “not fair but reasonable” by the IFA for the deal.
At the close of that offer in July 2024, the bank held 93.52 per cent of the insurer, falling short of the shareholding it needed to delist Great Eastern, or to compulsorily acquire the rest of the shares.
Its latest offer implies a price to embedded value ratio (P/EV) of 0.8 times; a price to net asset value ratio (P/NAV) of 1.6 times; and a price to earnings (P/E) ratio of 14.3 times of the insurer’s 2024 results.
It is also a premium to the median P/EV, P/NAV and P/E of comparable companies presented in the IFA letter for the previous offer.
Great Eastern was given an extension by the SGX until Jun 8 to announce its finalised proposal to comply with listing rules.
