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Merchants Bank back in the fray for Wing Lung stake

(Agencies)
Updated: 2008-05-08 12:48

China Merchants Bank Co has re-entered the bidding process for Hong Kong's Wing Lung Bank Ltd, heating up the competition to buy a majority stake in the local lender, The Wall Street Journal reported on Thursday.

The mainland's sixth-largest bank had initially submitted a nonbinding bid but did not make the original shortlist.

But now the bank is back in the fray, joining its bigger rival Industrial & Commercial Bank of China Ltd. and Australia & New Zealand Banking Group Ltd in the final race to acquire a 53.12 percent stake in the bank.

The initial shortlist included Bank of Communications Co, China's fifth largest bank by assets, which withdrew ahead of the due diligence process without offering any explanation.

China Merchants' renewed involvement in the deal could push up the final size of the deal to as much as $5 billion, the newspaper said.

Wing Lung's family shareholders, who are unloading their majority holding in the lender through this bidding process, are hoping to fetch more than three time the bank's 2007-end book value, the report quote sources as saying. This is equivalent to a sale price of HK$161.25 per share, according to calculations Merrill Lynch.

Shares in Wing Lung closed at HK$136.90 on Wednesday.

Wing Lung's family shareholders extended the auction date by two weeks to May 16 from April 30. The delay was made to allow further due diligence by the bidders after the bank reported a first quarter loss of HK$82.53 million, making it the first local lender to report a loss in nine years.

Wing Lung's earnings were hurt by its exposure to the troubled US subprime market.