UOB shares falter after $5.7 billion bid

Bank consolidation is on the Singapore agenda, via takeover moves from DBS, UOB and OCBC

SINGAPORE -- Stocks in Singapore's United Overseas Bank fell 5 percent Monday, the first day of trading since it launched a $5.7 billion friendly bid for Overseas Union Bank.

UOB, Singapore's second largest bank by assets, said on Friday it would pay S$10 per OUB share, comprising S$4.02 in cash and 0.52 of a UOB share.

The offer was valued at S$10 billion, topping a S$9.4 billion hostile bid made a week earlier by Singapore's biggest bank, DBS Group,

DBS had offered S$9.50 per share, comprising S$1.14 in cash and 0.61 of a DBS share.

Limited firepower for DBS

Shares in both UOB and OUB were suspended on Friday with UOB at S$11.50 and OUB at S$9.45.

Just before the close Monday, UOB were 60 cents or 5.22 percent at S$10.90, while OUB was up 15 cents to S$9.60.

Analysts said DBS might have limited firepower to trump UOB's bid, which has a higher cash component compared with DBS's bid.

DBS has just won approval from the Hong Kong Monetary Authority for its $5.4 billion takeover of Dao Heng Bank, making DBS the fourth largest bank in Hong Kong.

DBS said on Friday after the UOB announcement that it was "carefully studying the bid".

"DBS will continue to approach domestic consolidation in a disciplined and thoughtful manner and in a waya that will be beneficial to DBS and OUB stakeholders," it said.

Singapore in midst of consolidation

Singapore is in the midst of bank consolidation, considered a must by the Monetary Authority of Singapore as the market opens to foreign competitors. It said in 1999 that it expected there was room for only two strong domestic banks.

OCBC Bank, ranked third by assets, kicked off the takeover battle three weeks ago when it launched a S$4.8 billion all-cash bid for fifth-ranked Keppel Capital at S$3.38.

Analysts said the UOB-OUB deal did not mark the end of the takeover rush. There was still the possibility that a merged UOB-OUB could bid for Keppel Capital.

Another possibility was an eventual merger between DBS and OCBC.

Reuters contributed to this report.