Oversea-Chinese Banking Corporation (OCBC) on Friday (May 10) offered to acquire the remaining 11.56% stake in Great Eastern Holdings it doesn’t own for S$1.4 billion (US$1.03 billion). It plans to delist the insurer from the Singapore Exchange (SGX-ST).

The voluntary unconditional general offer is aimed at “strengthening OCBC’s business pillars of banking, wealth management and insurance, and optimizing its capital to enhance shareholder returns”, the bank says in a statement.

The offer price of S$25.60 represents a 36.9% premium over Great Eastern’s last traded price of S$18.70 and premiums of 38.6%, 40.0% and 42.4% over the one-month, three-month and 12-month periods up to and including the stock’s last trading date on May 9.

Says OCBC group chief executive officer Helen Wong: “The offer is a natural progression of OCBC’s strategy. We have moved intentionally to build up a strong wealth management franchise by hiring the best people and instituting best practices and processes, and raising our investment in Great Eastern. We have been looking at opportunities to best use our capital and believe the offer allows us to deploy our resources into a key business that is expected to be earnings accretive to OCBC.”

According to OCBC, Great Eastern provides diversification to its earnings base to deliver balanced earnings growth through economic cycles. Great Eastern has contributed an average of about S$700 million annually in net profit to OCBC over the past 10 years, which translates to an average of about 15% of the group’s annual net profit during the period.

By fully acquiring Great Eastern, OCBC can further capture the benefits from ongoing synergies and have a greater share of the insurer’s value, the bank says.

“As OCBC has been the majority shareholder of Great Eastern for the past 20 years, the group has entrenched institutional knowledge and expertise to manage the insurance business,” Wong says.

The move “will further accelerate our ambitious wealth management plans and build even tighter bonds and synergies across all our business pillars and key markets”, she adds.

J.P. Morgan Securities Asia Private Limited is the exclusive financial adviser to OCBC for the offer while Allen & Gledhill acts as the legal adviser.