* 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
* 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 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
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
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)