Between a rock and a hard place 

IT'S been a year now.

Singapore-listed Oversea-Chinese Banking Corp Ltd (OCBC) had launched a voluntary unconditional general offer on Great Eastern Holdings Ltd (GEH) on May 10, 2024.

However, it failed to take GEH private by the time the offer closed on July 12, 2024.

As trading on GEH shares has been suspended since July 15, 2024, OCBC has been assessing various options to comply with the Singapore Stock Exchange’s (SGX) listing requirements.

And on June 6, this year, OCBC finally decided to announce a two-prong approach to resolve the GEH’s status.

Resolution A will lead to a delisting of GEH on SGX. Should OCBC fail to obtain approval from the remaining independent shareholders, Resolution B will kick-in, which will allow GEH to meet the free-float requirement and allow resumption of trading in the shares of the company on SGX.

Interestingly, voting for and against delisting is mutually exclusive and the independent shareholders are still free to accept or reject the exit offer.

Exit offer

As at May 30, 2025, OCBC owns 443.603 million GEH shares, which represents approximately 93.72% of the total.

Hence, the exit offer involves 29.716 million shares not already owned, representing the balance of 6.28% of shares.

For Resolution A to pass, it must be approved by at least 75% of the total number of shares held by the independent shareholders present and voting.

Malaysian-listed Sungei Bagan Rubber Company (Malaya) Bhd (SBR) – which owns a total of 4.765 million shares – is the single largest independent shareholder. It holds about 16% of total shares held by independent shareholders.

Nyalas Rubber Estate Ltd (NREL), which holds 4.014 million GEH shares or 13.5%, is the next biggest. NREL is the ultimate shareholder of SBR with a 47.7% stake in the company.

In essence, NREL can collectively sway the voting for the delisting and exit offer as it controls 29.5% of the total shares held by independent shareholders.

The Wong siblings, Wong Hong Sun and Wong Hong Yen are the other significant independent shareholders with a combined total of 5.286 million GEH shares, which represents another 17.8% of the total shares held by independent shareholders.

Given the above scenario, NREL and the Wong siblings control 47.3% of the total shares held by independent shareholders and they will determine the outcome of OCBC’s fourth attempt to take GEH private.

Of course, that is if NREL, SBR and the Wong siblings attend and vote at the EGM.

If they don’t the outcome will be in the hands of the remaining independent shareholders.

Fair and reasonable

When it comes to merger and acquisition, as well as in any privatisation deal, it is important that the offer on the table needs to be fair and reasonable.

Towards this end, the Independent Financial Adviser (IFA) to OCBC’s exit offer had taken great strides in explaining the valuation point by using various methods and also extensive comparisons.

The previous offer made by OCBC at S$25.60 garnered some interest as the offeror was able to increase its shareholding from 88.44% to its current shareholding level of 93.72%.

At that time, the range of fair values derived by the IFA was between S$28.87 and S$36.19.

The IFA then used various methods to derive the GEH fair value range which was primarily based on 0.8 times price to embedded value (P/EV) of comparable companies and GEH’s own reported EV as at Dec 31, 2023, after adjusting for dividends.

The offer price was deemed to be not fair but reasonable by the IFA. GEH then too was adamant that there would be no revision to the offer.

In the current offer, the fair value range is between S$30.10 and S$38.08, which is 0.8 times of the reported EV as at Dec 31 2024 and the EV after adjusting for dividends of 45 cents that was paid last month.

In essence, the range of values improved by 4.3% at the lower end and 5.2% at the upper end.

As the exit offer price increased to S$30.15 – or 17.8% higher than the previous offer – it is now deemed to be fair, but just barely five cents above the low range of the fair value derived by the IFA.

Missing the point

Despite calls for OCBC to give a fair offer to take GEH private, the current offer price fails to consider what is fair.

After all, the remaining shares to be acquired is only another 29.716 million.

Even if OCBC were to make an offer of S$35 per GEH shares from the independent shareholders, which is the mid-point of the fair value, it was only going to cost the company another S$144mil, a drop in the ocean considering that it would have easily won over the independent shareholders overwhelmingly.

After all, S$144mil is only 0.2% of the company’s total market capitalisation of S$73bil and barely 2% of its reported net profit last year.

In addition, the exit offer has also deprived previous shareholders who had accepted the lower S$25.60 offer as 21.07 million shares were tendered then by minority shareholders. These shareholders already lost out cashing in an additional S$4.55 per share or S$96mil.

The exit offer does not do justice to shareholders who had accepted the offer last year when OCBC was adamant that its offer was final.

For OCBC, it has been a bitter journey taking GEH private and this fourth attempt too will likely fail given the lukewarm price offer while the option to remain listed via the bonus issue proposal and creation of a new class of shares is only going to result in the collapse of GEH share price once re-listed.

Post re-listing, OCBC will again be faced with issues related to low liquidity although it may meet the threshold that allows it to remain as a listed entity. There will be renewed calls for OCBC to take GEH private.

Similar to the failed privatisation attempts before, OCBC should have realised that being fair is paramount in taking a company private, and not by offering a price that is just a miserable five cents above the lower range of GEH’s fair value.

Trying to save a few bucks by offering a low-ball exit offer price but spending time and money on four privatisation attempts sounds like a misconceived proposition.

The bank would do better to focus on its business strategies, not get distracted by a cheap exit offer.