Investors anticipate sale of Chong Hing Bank

Shares in Hong Kong’s Chong Hing Bank rose sharply on Thursday after the family-owned lender said that it was talking to a potential buyer.

In a statement to the stock exchange, the bank said that third parties had approached its 50.2% controlling shareholder, Liu Chong Hing Investment, about the possibility of buying its stake but that no firm offer was on the table.

Liu Chong Hing is controlled by the bank’s chairman, Lit-Mo Liu, and his family.

The stock hit a record high of HK$27.70 shortly after the shares resumed trading on Thursday morning and ended the day at HK$26.30, up 17% since the stock was suspended at HK$22.45 on Wednesday.

Roughly 3.3 million shares changed hands — more than 10 times the average daily volume so far this year — which boosted Chong Hing’s market capitalisation by more than $200 million to $1.47 billion, according to Capital IQ data.

With a book value of slightly less than $1 billion it is Hong Kong’s smallest listed bank.

The Hong Kong Economic Journal reported that the potential bidder is Yue Xiu Enterprises, which is controlled by the city government of Guangzhou, though it has denied the report.

If a deal goes ahead, it will be the first takeover of a Hong Kong bank since China Merchants Bank paid HK$17 billion for a 46.9% stake in Wing Lung Bank in 2008. It will also be the first substantial investment in Chong Hing since 2007, when China Ocean Shipping bought a 20% stake from Cosco Pacific for HK$2.1 billion.

That deal was done at 1.7 times book value, with DBS and NM Rothschild as advisers, which implies an acquisition price of around HK$29 a share for any potential buyer, or $850 million for the Liu Chong Hing stake.

Mitsubishi UFJ is also an investor in Chong Hing.