Oversea-Chinese Banking Corporation says it reached agreement with ING Bank N.V. to acquire its Asian private banking business, comprising Singapore-based ING Asia Private Bank Limited and its affiliated entities (IAPB), for US$1.463 billion ($2.048 billion) in cash. The acquisition amount includes IAPB’s estimated surplus capital of US$550 million. OCBC says the purchase will be funded by the bank’s existing resources.

OCBC says the acquisition of IAPB marks a transformational step in OCBC Bank’s private banking business and will more than triple the bank’s private client assets under management (AUM) to US$23 billion.

“OCBC Bank will be well placed to capture the opportunities provided by the rapid growth of Asia’s wealth management industry and Singapore’s unique position as a major private banking hub, attracting wealth from both within and outside Asia,” it says in an SGX statement.

The bank says the acquisition is also in line with its strategic goal of becoming a leading player in wealth management, as articulated in its New Horizons II Strategy. It will significantly strengthen the bank’s position in serving the wealth management needs of its mass, mass affluent and high net worth customers.

Proposed transaction
OCBC Bank will pay a total consideration of US$1,463 million in cash for Singapore-based ING Asia Private Bank and its affiliated entities. The consideration takes into account the estimated surplus capital of US$550 million at IAPB.

As at Aug 31 2009, ING Asia Private Bank Limited had shareholders’ funds of US$906 million and Tier-1 capital adequacy ratio of 25%.

In terms of valuation multiples, OCBC Bank is paying 1.6 times IAPB’s net asset value at Aug 31, 2009, 17 times its normalised 2008 earnings, 3.4% goodwill over AUM and, adjusted for estimated surplus capital, 5.8% of AUM. The purchase will be funded by OCBC Bank’s existing resources. Following the acquisition, OCBC Group’s pro-forma Tier 1 capital ratio (based on June 2009 figures) is expected to be reduced by approximately 1.5% points to 13.9%, remaining well above the regulatory minimum of 6%.

As part of the transaction, ING Group will continue to provide certain key transitional services to IAPB for a period of time after completion.

Subject to regulatory approvals being received in Singapore and other relevant jurisdictions, the transaction is expected to be completed around year-end 2009.

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