Singapore bank rivals target Keppel Cap

Singapore is heading for consolidation in its banking sector

By Geoff Hiscock
Asia business editor

SINGAPORE (CNN) -- Keppel Capital Holdings, the target of a $2.65 billion takeover offer from Singapore's OCBC Bank, confirmed Thursday it is talking to another bank, UOB.

Oversea-Chinese Banking Corporation (OCBC) on Tuesday launched its cash bid for Keppel Capital, the listed holding company that owns Singapore's Keppel TatLee Bank and related financial services businesses.

Raising hopes of a bidding war, OCBC's smaller rival United Overseas Bank (UOB) said on Wednesday it had been looking at Keppel Capital for some time.

Keppel Capital confirmed UOB's interest with a one-sentence statement to the Singapore Stock Exchange on Thursday.

"The company refers to the offers from OCBC and confirms that it is in talks with UOB," company secretary Lynne Tan's statement said.

OCBC confident bid will prevail

OCBC, Singapore's second-largest bank behind DBS, remains confident its bid will prevail.

OCBC vice-chairman and chief executive Alex Au told CNN Thursday that the bank's bid for Keppel Capital was "a very attractive offer" that represented a 32 percent premium to the average share price over the past three months.

Au said he did not regard the bid as hostile but would not speculate on increasing OCBC's offer in reaction to interest from UOB or any other parties.

He described Keppel Capital as a "very good franchise" that had complementary strengths to OCBC. He said his bank was not likely to lose interest.

"This is a well planned initiative," he told CNN.

Step towards bank consolidation

When it announced its offer of S$3.38 cash for each Keppel Capital share on Tuesday, OCBC said the combination of the two groups would reduce the number of major local banks in Singapore to four.

This represented a "significant move forward in the desired consolidation of the Singapore banking sector".

The Monetary Authority of Singapore said in 1999 that it saw room for only two strong local banks. DBS, which recently took over Hong Kong's Dao Heng Bank, is the clear leader in the Singapore market.

Keppel Capital is owned 37 percent by Singapore conglomerate Keppel Corp and 4.9 percent by the Singapore government's investment arm, Temasek Holdings. Tat Lee Bank founders, the Goh family, hold 10.6 percent.

Shares in Keppel Capital have risen from S$2.96 on Monday to trade at S$3.58 Thursday - a gain of 21 percent. OCBC shares were up 5.6 percent to $12.00, while UOB shares rose 1.7 percent on the day to S$11.90.