UPDATE 2-OCBC in talks to sell United Engineers stake to Thai tycoon -sources

Thu Aug 21, 2014 6:12am EDT

Related Topics

* OCBC, related firms own 36 pct of United Engineers

* OCBC said recently it will weigh selling non-core assets

* OCBC, Great Eastern confirm in discussion on sale of stakes

* United Engineers shares suspended, up 7.4 pct before halt (Adds reaction from OCBC and Great Eastern Holdings)

By Saeed Azhar and Rujun Shen

SINGAPORE, Aug 21 (Reuters) - A firm backed by Thai billionaire Charoen Sirivadhanabhakdi is in talks to buy a $430 million stake in United Engineers from Singapore's OCBC Group, which will trigger a full takeover of the engineering and property company.

The move would help beef up capital for Singapore's second-biggest lender after its acquisition of Hong Kong's Wing Hang Bank and also trigger a takeover offer for United Engineers, which has a market value of $1.2 billion.

OCBC and related companies own a combined 36 percent in United Engineers, according to the United Engineers' latest annual report. Under Singapore rules, a company that acquires a stake of 30 percent in a listed firm must make a mandatory offer for the remaining shares.

United Engineers' shares jumped 7.4 percent on Thursday before being halted. They were suspended at the request of the company after the bourse queried the sudden rise.

OCBC and Great Eastern Holdings said in a statement that they are in discussions over a possible sale of their stakes in United Engineers and WBL Corporation Ltd, a subsidiary of United Engineers, but did not name the potential buyer.

The sources declined to be identified because the deal has yet to be officially announced. United Engineers declined to comment, and representatives for Charoen could not be immediately reached for comment.

The news of the talks comes after OCBC Chief Executive Samuel Tsien said this week that the bank could look at non-core asset sales in the wake of its $5 billion Wing Hang acquisition. It has announced plans to raise $2.7 billion in a rights issue, but the fund-raising was seen by some investors as insufficient.

"While this news is positive, we estimate that OCBC's sale of its UEM stake will boost its common equity tier 1 ratio by only 10-11 basis points though it is the first progressive step towards raising its capital buffer," CIMB analysts said in a research note.

The bulk of OCBC's deemed interest in United Engineer is held through its insurance unit, Great Eastern and the Lee family, the single biggest shareholder of OCBC.

OCBC can only recognise additional capital if Great Eastern declares a special dividend from the gains from a potential stake sale in United Engineers stake, CIMB said.

A successful deal would be the second major transaction between the OCBC Group and Charoen-linked companies after the Thai tycoon acquired the Fraser and Neave conglomerate for $11 billion, including a 22 percent stake owned by companies related to OCBC.

United Engineers made a net profit of S$118.1 million ($94.46 million) in 2013, up 64 percent from a year earlier. Its Singapore operations contributed 43 percent of its 2013 revenue, followed by a 27 percent from its China unit.

United Engineers in 2013 acquired WBL Group, which has a car dealership business in a number of Asian countries and develops properties in China. (1 US dollar = 1.2502 Singapore dollar) (Editing by Ryan Woo)

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