[SINGAPORE] OCBC’s latest exit offer for Great Eastern is more attractive than its initial privatisation bid, but it still remains to be seen if the insurer will be delisted, given that the decision likely lies in the hands of a few significant shareholders, analysts said.
OCBC on Friday (Jun 6), at the request of the insurer, 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.
EY, the independent financial adviser (IFA) to the deal, said this offer is “fair and reasonable”.
The offer comes months after OCBC failed to delist the insurer following a voluntary unconditional general offer for all of the insurer’s shares at S$25.60 each – a deal that was deemed “not fair but reasonable” by the IFA.
Lim Rui Wen, analyst at DBS Group Research, said the new offer was at a “considerable premium” to the previous offer at S$25.60 per share, which may move some of the minority shareholders.
“However, as there are significant minority shareholders holding close to half of the remaining 6.28 per cent stake, it ultimately depends if the significant shareholders are willing to accept the revised price,” Lim said.
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To pass, the offer will need approval from at least 75 per cent of the remaining Great Eastern shares.
Glenn Thum, research manager at Phillip Securities Research, said the offer price is “definitely better” than previously, but noted that it is still at a slight discount to Great Eastern’s embedded value (EV).
Among others, the offer implies a price-to-EV ratio of 0.8 times the insurer’s 2024 results.
The discount might result in some pushback from the most resistant minority shareholders, Thum said.
“The minority shareholders that have held out were very vocal in getting a better deal, as they felt that the previous deal was too low,” he said.
Nevertheless, he expects the majority of the remaining minority shareholders would take the deal given that the IFA has deemed it “fair and reasonable”.
Otherwise, minority shareholders will need to be mindful that trading liquidity for the stock will likely be “very thin”, even if the stock resumes trading should the offer fall through, said a research analyst at RHB.
Meanwhile, Robson Lee, partner at Kennedys Legal Solutions, said shareholders should await the offer circular for the details of the proposed new constitution.
If the delisting resolution is not passed, the exit offer will lapse, and Great Eastern will propose resolutions to satisfy the free-float requirement.
This includes a resolution to adopt a new constitution, as well as a one-for-one bonus issue 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.
OCBC and Great Eastern said in a joint offer announcement that the new constitution consists largely of the existing provisions of the insurer’s current constitution, and is updated to permit the bonus issue. Further details will be laid out in the circular.
“The devil lies in the details… because it’s not just changing various provisions in the current constitution,” Lee said.
He added that it might have been fairer if the IFA also commented on the proposed bonus issue, given that the two options are presented in a package to minority shareholders.
“If you don’t support the delisting, you would have to reconcile with the fact that you have a new constitution and bonus shares… since OCBC can also vote on that,” he said.
Furthermore, Lee noted that the Class C non-voting shares can be converted to ordinary shares after five years, and OCBC has stated that its long-term strategy is to take Great Eastern private.
“Taken together, it seems that even if the trading suspension is lifted, it would appear to be just a temporary stopgap measure for OCBC,” he said.
Minority shareholder rights
Some observers noted that the deal exposed gaps in minority shareholder rights.
David Gerald, founder, president and chief executive of the Securities Investors Association (Singapore), also known as Sias, said he was “disappointed” that shareholders who were unable to withstand the trading suspension and accepted the previous offer have ultimately lost out on realising a fair value for their shares.
Shareholders who held on were also left without a clear resolution framework or timeline given the repeated extensions, while the trading suspension “severely limited” their investment decisions, he said.
For former remisier Ong Chin Woo, who has publicly fought to unlock value for minority shareholders of Great Eastern since March 2024, the latest offer “raises concerns about fairness and investor confidence in Singapore’s capital markets”.
Ong said the higher offer price within a short time frame “suggests that a more equitable proposal could have been made from the outset”.
“Why weren’t Great Eastern’s minority investors offered better terms from the outset? This is something only OCBC’s board can answer,” he said.
Business as usual?
Even if the delisting resolution fails, this is unlikely to change the way the lender manages Great Eastern, analysts said.
Phillip’s Thum said OCBC might not be able to fully integrate Great Eastern, and some plans for OCBC’s “One Group” strategy might have to change moving forward.
But given that OCBC is still the insurer’s largest shareholder and would continue to have control over the latter’s direction, he does not see much impact to the lender if Great Eastern’s free float were to be restored, he said.
For Michael Makdad, senior equity analyst at Morningstar, it would be “disappointing” if the delisting bid fails, but the bank is likely to continue operating the insurer as it has been doing.
He said: “It hasn’t been easy for OCBC to obtain control of Great Eastern over the years. I do think this is the final offer.”
