Private equity investor Permira has emerged as the preferred bidder to buy Bank of East Asia Ltd’s share registry unit Tricor Holdings for between $750 million and $800 million, sources said on Tuesday, after six months of bidding that attracted the interest of top Chinese insurers among others.
No deal has been signed yet but Permira and Bank of East Asia are in advanced talks to reach an agreement, people familiar with the matter said. The strength of the bidding reflected the scarcity of sizeable deals for private equity firms, who are sitting on an estimated $100 billion of undeployed cash in Asia.
Bank of East Asia, which is under pressure from U.S. hedge fund investor Elliott Management, is hoping the sale of Tricor could placate some shareholders and win their support in the battle against Elliott, which has been agitating for the sale of the bank, still run by the founding Li family.
Permira, which manages 31 billion euros ($34.8 billion) of investments globally, emerged as the dark horse in the auction in which Vistra Group, a business owned by Baring Asia Private Equity, was seen as the front runner.
Tricor provides corporate services and is attractive to private equity firms due to its stable and steady cash generation. Permira’s bid would value Tricor at about 15 times its core earnings, which totalled about $55 million last year, Reuters previously reported.
Permira is expected to fund the deal with about $450 million in equity funds and the rest from borrowed money, the people said. HSBA and Japan’s SMBC are among the banks providing debt financing, the people added.
Elliott, which owns 7 percent of Bank of East Asia and has been critical of its performance, has been agitating for change and started legal proceedings against the bank in July over a share issue.
The Hong Kong bank announced plans to review its 75.6 percent holding in Tricor in February. Hong Kong port operator NWS Holdings Ltd, backed by billionaire Cheng Yu-tung, owns the remaining stake and is also considering selling out.
Reuters reported on Monday that Bank of East Asia has secured about five final bids, including offers from Vistra Group, Ping An Insurance Group of China and Permira Group among others.
Bank of East Asia and Permira declined to comment.
A deal would mark the first major sale of any business by Bank of East Asia, which was established nearly a century ago. While several Hong Kong-based family-owned banks have sold out due to deteriorating market conditions, Bank of East Asia survived as an independent bank in a market that is dominated by HSBC and Standard Chartered plc.
Bank of East Asia’s shares rose 0.9 percent to HK$32.50 on Tuesday, while the benchmark Hong Kong share index was up 1.1 percent.