June 2, 2008 ─ China Merchants Bank (“CMB”) and Wing Lung Bank Limited’s (“WLB”) major shareholders, Wu Jieh Yee Company Limited, Wu Yee Sun Company Limited, and Yee Hong Company Limited (the “Selling Shareholders”) announced today that they have entered into agreements whereby CMB has conditionally agreed to acquire a 53.12% stake in WLB from the Selling Shareholders for a total cash consideration of HK$19.3 billion (RMB 17.2 billion), or HK$156.5 per share (the "Acquisition"). Based upon WLB’s audited 2007 financial results, the purchase price implies a valuation of approximately 2.91 times book value.
The transaction is not expected to have negative impact on CMB’s EPS, even excluding the beneficial impact of synergies. CMB’s capital adequacy ratio is expected to remain above 8% post the Acquisition. CMB intends to finance this Acquisition through internal resources and plans to strengthen its capital adequacy ratio through the issuance of subordinated debt in the PRC market, subordinated debt in the international market, and/or convertible bonds in the international market.
CMB will make an unconditional mandatory general offer at the same price for the remaining outstanding shares upon the completion of the Acquisition, which is subject to PRC and Hong Kong regulatory approvals and shareholders' approval.
Mr. Xiao Qin, Chairman of CMB, commented: “In line with our international expansion strategy, this acquisition represents an important milestone for CMB. It allows CMB to enter a strategically critical and highly sophisticated market. We are excited to build upon WLB’s distinguished history and successful track record in the Hong Kong banking market. CMB intends to integrate CMB’s strength in retail and SME banking, online banking and credit card business with WLB’s extensive distribution channel, product expertise, and local knowledge to further grow the business and enhance CMB’s capabilities and quality of service for our mainland customers, thereby creating greater value to our shareholders.”
Mr. Weihua Ma, President and CEO of CMB, said: “WLB is a quality banking franchise that has served customers in the Hong Kong market for over 75 years. We recognize the strength of the Wing Lung brand. The acquisition of Wing Lung Bank plays an important role in our expansion strategy. Established in bordering city of Shenzhen, CMB enjoys a unique advantage of proximity. CMB will integrate respective strengths from both sides, such as distribution capability, brand name and product innovation to enhance our overall competitiveness and provide a broader service to both banks’ customers. In addition, CMB is committed to the long-term stability and continuity of WLB’s management and employees.”
JPMorgan acted as the exclusive financial adviser to CMB for this transaction.