China Merchants Bank, the country's sixth-largest bank, has agreed to buy control of Wing Lung Bank in a deal that values the small Hong Kong lender at $4.66 billion, beating out Australia and New Zealand Banking Corp for the tie-up.
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.
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.
China Merchants said it would buy the stake from Wu Jieh Yee, Wu Yee Sun and Yee Hong for HK$19.3 billion, in a deal that would enable the Chinese lender to expand its customer base and distribution network in Hong Kong.
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.
The sale price represents a premium of about 6 percent over Wing Lung's last traded price of HK$147.40 on Thursday.
Wing Lung shares have soared nearly 80 percent since mid-March, when reports said that its largest owners had hired investment banks to advise on a possible sale.
Shares in both lenders have been suspended since Friday morning, pending the announcement. Trading in the shares will resume on Tuesday.
Credit Suisse and UBS were advising Wing Lung's controlling shareholders. JPMorgan was representing 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 the branding and the name of Wing Lung Bank to benefit from the strong reputation that the Hong Kong lender has developed in the city over the past 75 years.