China Merchants seals $4.7 bln Wing Lung deal

HONG KONG (Reuters) - China Merchants Bank (3968.HK) has agreed to buy control of Wing Lung Bank (0096.HK) for $4.66 billion in a deal allowing China's sixth-largest lender greater access to the Hong Kong market.

After initially dropping out of the auction, China Merchants Bank (600036.SS) returned late in the process to beat Australia and New Zealand Banking Corp (ANZ.AX) and Industrial Bank of China (ICBC) (1398.HK) (601398.SS), the world's largest bank by market value, who had been front-runners for Wing Lung.

China Merchants said late on Monday it would pay HK$156.50 a share for a 53 percent stake in Wing Lung, confirming what people with direct knowledge of the matter told Reuters on Friday and valuing Wing Lung at 2.9 times its 2007 book value.

Wing Lung shares rose more than 3 percent on Tuesday to HK$152.40. China Merchants was up 4.6 percent at HK$29.20.

The tie-up, which is expected to trigger further bids for small Hong Kong banks, gives China Merchants a presence in a city that has long been a gateway for overseas investment into China and is increasingly integrated with the mainland economy.

"The acquisition offers a unique opportunity for CMB to establish a sizeable customer base and distribution network in Hong Kong," China Merchants said in a joint release.

China Merchants said it would buy the stake from Wu Jieh Yee Co Ltd, Wu Yee Sun Co Ltd and Yee Hong Co Ltd for HK$19.3 billion.

China Merchants will make a general buyout offer at the same price of HK$156.50 apiece for the rest of Wing Lung shares, which it is required to do under Hong Kong rules.

Wing Lung shares have soared nearly 80 percent since reports in mid-March said its largest owners had hired investment banks to advise on a possible sale.

Credit Suisse (CSGN.VX) and UBS (UBSN.VX) (UBS.N) advised Wing Lung's controlling shareholders. JPMorgan (JPM.N) represented China Merchants Bank.

Wing Lung has assets of about $12.3 billion and operates 42 offices with a staff of more than 1,600.

China Merchants said it would maintain Wing Lung Bank's branding and name that have been developed in the city over 75 years.

The bank said it would keep Wing Lung staff for at least 18 months from completion, except under "limited specific circumstances.".

(Additional reporting by Donny Kwok; Editing by Anne Marie Roantree & Ian Geoghegan)