China Merchants Close to Wing Lung Deal


China Merchants Bank has agreed in principle to buy control of Hong Kong's Wing Lung Bank in a deal that would value the lender at over $4.5 billion, a person familiar with the situation said on Friday.

The person, who could not be identified given the sensitivity of the situation, said no deal had been signed and negotiations were ongoing. Shares in both lenders were suspended on Friday pending the announcement of potentially price sensitive news.

Both banks had no immediate comment beyond what was in their trading halt statements.

The source said China Merchants had tentatively agreed to pay more than HK$150 a share for Wing Lung. Shares in Wing Lung have rocketed nearly 80 percent since mid-March, when media reports said the lender's controlling shareholders had hired investment banks to advise on a possible sale.

Wing Lung shares ended at HK$147.40 on Thursday, giving the bank a market value of about $4.4 billion.

Spokesmen for Credit Suisse and UBS, which are advising Wing Lung's controlling shareholders, declined to comment. A spokeswoman for JPMorgan, which is representing China Merchants Bank, also declined to comment.

Media reports in recent days have said China Merchants Bank and members of the Wu family, who control 53.1 percent of Wing Lung, were in exclusive talks towards a deal.

On Thursday, however, the chief executive of Australia and New Zealand Banking Group, Australia's third-largest lender, said it was still in the running for Wing Lung.

ANZ CEO Michael Smith also said reports that China Merchants would pay 3.1 times Wing Lung's book value sounded far-fetched. "That's crazy. Why would you pay three times book for an institution like that?," he told reporters in Tianjin, China.

A book value of 3.1 times would make Wing Lung Bank worth HK$166.625 a share, or almost $5 billion.

Industrial and Commercial Bank of China, the world's biggest bank by market value, had also been in the hunt for Wing Lung, although recent media reports said sixth-ranked China Merchants was in exclusive talks with Wing Lung.