You have to hand it to Temasek. For a government investment agency it certainly knows how to put the cat amongst the pigeons. Not content with outgunning every company in the regional M&A market, it has now scuppered a deal painstakingly put together by one of Singapore's richest families.
On Tuesday Temasek made an offer to buy UOB's entire stake in its subsidiary UOL. It offered to pay S$2.06 per share and S$0.81 per warrant for the shares, trumping UOB's offer to sell its stake to its own shareholders at a price of S$1.58 a share. Yesterday UOB announced it was withdrawing its own offer to evaluate its own options. The bank will be appointing a financial adviser to advise it on the next moves. The Temasek offer expires on May 11 at 5pm.
This development adds a huge twist to an already engrossing saga. It all started in 2002 when the MAS decided banks had to divest their non-core assets. This was originally slated to happen by 2004, but the deadline was extended last year in the face of weak markets and protests by bank owners.
Last week UOB's chairman Wee Cho Yaw held a shareholders' meeting to discuss his solution to the divestment dilemma he was facing with UOL. His plan was to sell the bank's holding in UOL to UOB shareholders (including himself), thus divesting UOL out of UOB but allowing him to retain control.
However UOB shareholders complained their asset was being sold too cheaply. The clear conflict here is that the Wee family controls both assets and shareholders of UOB felt they were given a choice they could not make: buying an asset they already own from themselves at a discount to its perceived value.
Ironically the Temasek bid validates that assumption as it says the price UOL is being offered at is too cheap.
However some analysts think there could be more to it than just UOL and Temasek could be after the land company as it in turn owns 5% of UOB. "We're very surprised Temasek has emerged as a buyer," says Sin Mui Tan, a banks analyst at Merrill Lynch in a research note issued to clients yesterday. "Whilst the reason for Temasek's offer to buy UOB's interest in UOL is unclear (for UOL's "hidden value" or for control of the 5% stake in UOB), we believe Wee Cho Yaw could read this as a challenge to his shareholding and control of UOB."
The question now is what is Temasek up to? It has made no public comment on the matter but one can be fairly certainly the rocket scientists on Shenton Way realize quite how controversial this move is. Bankers close to the company were surprised by the move and pointed to its ramifications.
"This is hugely politically sensitive: it is a government linked company going after a private company," said one speaking off the record. "The question is what are they trying to do? It looks as if they see it as a chance to outbid on a cheap asset. I don't think it has a political element to it as Temasek has said so many times that it operates on strictly commercial terms. I think this bid says that Temasek will impose some discipline on the market and when they see an asset being sold cheap, they will bid for it."
The ball is now squarely in Wee's court now. He has until Monday 5pm to make his next move.
