OCBC

OCBC: Brokers are citing that OCBC may face some hurdles for their takeover bid for Wing Hang Bank after noting that hedge fund Elliott Management raised its stake to 7.8% for the Hong Kong bank a day before the offer by OCBC was announced. Any valid acceptances of the offer between 75%-90% would require OCBC to issue Wing Hang's shares back to the market to maintain a minimum free float of 25%, and the reissued shares are highly likely to be sold at a substantial discount to the offer of HK$125/share (1.77x P/BV). Share price of OCBC may see downside pressure during the offer period which will last till 29 Jul, as OCBC may be forced to raise the offer price to 1.8x - 1.9x P/BV and this would mean an even more expensive acquisition, and dilution from share issuance would be even higher than what the street expected. Also, share price for Wing Hang Bank may also see a 30% downside risk if OCBC walks away from the deal, falling back to the 1.2x P/B levels. As of 4 Jul, OCBC has 50.4% control of Wing Hang Bank.