Hong Kong based Wing Lung Bank Ltd. has picked China Merchants Bank Co. as its preferred bidder after the Wu's family announced to sell its whole 53 percent stake.
Merchants Bank is in exclusive talks with Wing Lung Chairman, Michael Wu, and his family according to reports. If successful, it will be the largest acquisition in seven years in Hong Kong.
Wing Lung bank has 35 branches in Hong Kong and $12 billion of assets. On April 30, the bank reported a first-quarter loss after writing off $61 million of investments in structured investment vehicles and collateralized debt obligations.
Buying Wing Lung will help Merchants Bank engage in wealth management and other non-traditional services which are new business in mainland market.
China banks have eyed the Hong Kong market for a long time.
Industrial & Commercial Bank of China Ltd. known as ICBC, the world's largest bank by market value, paid $231.5 million for control of Union Bank of Hong Kong in 2000. China Construction Bank followed six years later, buying Bank of America Corp.'s Hong Kong and Macau unit for $1.24 billion in what was then the largest overseas takeover by a Chinese lender. ICBC and Australia & New Zealand Banking Group Ltd. are Merchants Bank's competitors in Wing Lung's deal.
This trade will be concerned about $4.8 billion, or HK$161 per share, one people who was familiar with the deal said. Wing Lung's stock has rallied 60 percent this year as speculation of a takeover mounted.