Great Eastern offer: It’s time for everyone to move on

IT WAS undeniably an attractive offer of S$30.15 that OCBC was making for each share in Great Eastern. Even the independent financial adviser called it “fair and reasonable” – compared to the “not fair but reasonable” billing for the S$25.60 offer in May last year. 

But a delisting vote needed to pass before the offer would be paid out. 

Close to 30 million Great Eastern shares were not held by OCBC. Three quarters of those shares needed to be cast in favour of delisting. 

Mathematically, the writing was on the wall: Several shareholders had opposed any form of a deal, and they held shares that accounted for just over 25 per cent of those 30 million shares. As long as they voted against the delisting, there was no hope of the vote succeeding. 

And that was how things turned out. Shareholders holding 63 per cent of the shares wanted the delisting. But because a handful of shareholders held millions of shares, the 75 per cent threshold of “yes” could not be achieved. It is why the S$30.15 exit offer evaporated faster than ice in a hot pan. 

In any case, the contingency had already been planned for, with the ingenious plan for Great Eastern to issue bonus shares to all shareholders. Shareholders can elect for the Class C bonus shares which do not carry voting rights, but are entitled to the economic interest. (*see amendment note)

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Assuming only OCBC takes up these Class C shares, it would have held a 93.72 per cent stake in Great Eastern. For public-float purposes, however, it would be diluted down to 88.19 per cent. This would have taken the public float beyond 10 per cent, so shares of Great Eastern would resume trading. 

Taking full control of Great Eastern was an objective that made business sense. It enabled OCBC to strengthen its business pillars of banking, wealth management and insurance, while optimising its capital to enhance shareholder returns. 

But it has been a protracted exercise, consuming the board’s time and energy. On the plus side, OCBC is on the way towards restoring Great Eastern’s free float, while retaining a higher economic interest – all this without having to fork out additional dollars.  

As an aside, if all the some 30 million shares had been cast in favour of the delisting, the bank would have shelled out S$900 million on the offer -– arguably not the best use of its capital.

So, as an outcome, it is good enough. For the bank which embarked on this exercise to optimise its corporate structure, its 125,000 shareholders need things to move on. There are, after all, pressing business and operational challenges, given US President Donald Trump’s tariffs and the lower interest rate environment. 

Equally for Great Eastern, the insurance industry is facing headwinds as yields fall while healthcare costs rise, so – whether listed or suspended – the insurer has a business to run and policyholders to manage.  

For those minority shareholders who have held out so long and were finally ready to bite the bullet, it is a disappointing outcome. But they should avoid cutting off their nose to spite their face by taking up the Class C shares in case it prevents the free float from rising to 10 per cent. While they would get their dividends in that scenario, they would still be shareholders of a suspended stock. How things pan out in that situation looks more uncertain. If trading resumes, at least there is a market to exit, even if the price is unlikely to achieve the offer price. 

What minority shareholders will have to accept, as with many deals, is that there is seldom a perfect outcome that satisfies everyone, and that most times, there is no second bite of the cherry.

*Amendment note: An earlier version of this story said that Great Eastern will be issuing bonus Class C shares to all shareholders.