[SINGAPORE] It will be a fallacy to say that OCBC does not know the insurance business, given that its insurance arm, Great Eastern Holdings (GEH), has been associated with the banking group for the last three decades, said OCBC board chairman Andrew Lee.
OCBC does not need to be concerned about integration risks with GEH, having owned a large majority of the insurer’s shares since 2004, he said. Executives of both the bank and the insurer have “criss-crossed”, while board directors have both banking and insurance experience, he added.
“You want to go out and buy another bank when we already have this in our books?”
Lee was addressing shareholder concerns about OCBC’s acquisition of GEH at OCBC’s annual general meeting (AGM) for the financial year ended 2024. The event on Thursday (Apr 17) was attended by 1,740 shareholders.
A shareholder asked whether OCBC was paying too much for the acquisition, and if there was a better use of the capital.
Another shareholder asked about the rationale behind OCBC’s offer price, given that it was deemed not fair but reasonable by the independent financial advisor (IFA) to the deal.
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On the offer price, Lee said OCBC had engaged “the investment bank of the world’s top bank” as its financial adviser. Offer documents name JP Morgan Securities Asia as the exclusive financial adviser for the deal.
“We paid millions for the advice, and the price that we offered for Great Eastern last year was based on the advice,” Lee said.
Noting suggestions to raise the offer price, he said whatever price it could offer would be outside the recommended range: “We cannot raise the offer (price); we are not a small-time business where we can raise (it) when we like. We have governance, we have processes.”
Shareholders also asked about the strategy behind the acquisition, as well as minority shareholder rights for OCBC shareholders.
Lee noted that GEH had “always been a part of” OCBC, and that the lender was unique in that it is not a pure-play bank.
Lee had also addressed concerns about the acquisition of GEH during FY2023’s AGM, at which he said OCBC should be seen as a “financial conglomerate” of many parts, setting it apart from the other two local banks in Singapore.
He said in jest at Thursday’s AGM that he has since been “corrected” that OCBC was, in fact, an “integrated financial services group”.
But he also reiterated that GEH would present OCBC synergistic benefits, such as cross-selling capabilities to GEH’s 16-million strong customer base, as well as profit contributions of nearly S$1 billion in FY2024.
He noted that OCBC’s strategy was to double down on the areas in which it has competitive advantage. This includes wealth management, to which GEH contributes.
Meanwhile, he said it “cannot be reasonable (and) sensible” to give out GEH shares – worth around S$11 billion based on the price of S$25.60 – for free to OCBC shareholders.
Giving out the shares would lower the dividends for OCBC shareholders, and “severely” hinder the group’s ability to generate future profits.
Lee said the lender cannot comment on future steps, given that it is waiting for the views of the IFA engaged by GEH for the deal.
He also noted that any comments made will be price sensitive for OCBC, which is still “alive and kicking” on the exchange, even though GEH is currently suspended.
“We are very fair… to OCBC shareholders – the board has exercised its fiduciary duty in keeping strictly with the process,” Lee said.
“That is the balance and prudence which we as directors of OCBC have practised. So there’s nothing that we are ashamed (of).”
