Great Eastern says Takeover Code not breached when it shared IFA valuation with OCBC

[SINGAPORE] Great Eastern Holdings (GEH) said that sharing with OCBC the indicative range of share values determined by its independent financial adviser (IFA) did not breach The Singapore Code on Take-overs and Mergers, or the Takeover Code.

GEH was responding to questions from shareholders and the Securities Investors Association (Singapore), or Sias, on its exit offer price negotiation with OCBC.

In bourse filings on Saturday (Jul 5) and Jul 3, GEH tackled various questions ahead of its extraordinary general meeting (EGM) on Jul 8. One of them was whether sharing the indicative range of the shares’ values would amount to “selective disclosure to some and not all shareholders”, and if doing so would have led to OCBC proposing a low exit offer price, defeating the IFA’s evaluation. It noted that the conduct of the independent directors was also questioned.

“The rule in the Takeover Code requiring information to be made equally available to all shareholders as nearly as possible at the same time and in the same manner has been cited out of context, particularly since OCBC is the offeror in the context of the current exit offer,” said the insurer.

The value range was shared with OCBC in strict confidence and on the understanding that any exit offer price arrived at would have to meet the “fair and reasonable requirement” under Rule 1309 of the Singapore Exchange’s listing manual to support the delisting, GEH said.

Ernst & Young Corporate Finance, the IFA, had given an indicative value range of S$30.10 to S$37.63 per share, which GEH shared with OCBC. The insurer had a further series of exchanges with the offeror, before arriving at the exit offer price of S$30.15 per share.

It added that sharing the indicative value range with OCBC resulted in the final exit offer price, which was an “improvement” from the range of prices discussed initially.

2024 vs latest financials

GEH noted that the valuation relied primarily on the embedded value as at end-2024. While it acknowledged that delays in making the exit offer made the figure more than six months old, the embedded value is still the most recent complete data set available. 

“Embedded value includes not only the value of new business, but also the sum of the value of in-force business and the value of the adjusted shareholders’ funds,” said GEH. It added that the calculation of embedded value requires a comprehensive assessment using full-year data and actuarial assumptions, which is why this figure is formally determined only once a year at the end of each financial year.

The insurer highlighted that although its first-quarter financials were strong, the new business embedded value reflects the present value of projected future profits from new business sold in the year, and is not equivalent to embedded value.

“The latest operational metrics from Q1 2025 show that Great Eastern’s new business embedded value rose 19 per cent to S$148.8 million, while profit attributable to shareholders increased by 13 per cent to S$345.5 million,” it noted, adding that updated half-year financials will be released only on Jul 28, three weeks after its EGM.

While interim results such as new business embedded value and Q1 profit were considered in context, they were unaudited and were not used to reset the embedded valuation in the middle of the financial year.

“The IFA also considered a range of other factors, including market environment, liquidity conditions and historical trading suspension, before concluding that the exit offer was fair and reasonable.”

Responding to a question on whether GEH would be attempting to obtain undertakings from any shareholders to vote for the delisting resolution, the company noted the neutral stance of its board, and said it has not and will not be attempting to do so.

Shareholders also asked about the impact to the company’s capital adequacy if a selective capital reduction at 90 per cent of its latest embedded value were conducted. GEH said that a selective capital reduction is not in line with its capital deployment plans.

“However, purely for illustrative purposes, if a selective capital reduction was undertaken at the current exit offer price of S$30.15, GEH’s common equity Tier 1 capital would be reduced by almost S$900 million,” it said.

Shareholders also raised the option for payment in OCBC shares in exchange for the insurer’s, so that its original shareholders could also participate in its growth after the exit.

“To fulfil the relevant delisting requirements in the listing manual, the conditional exit offer made by OCBC to support the delisting pathway had to include a cash alternative as the default alternative. Hence, OCBC’s support was sought in respect of a cash exit offer.”

It noted that shareholders who wish to participate in OCBC’s growth may use the cash proceeds from the exit offer to acquire OCBC shares in the market.