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If you follow the news on the Singapore Exchange (SGX), you might have heard about OCBC’s ongoing $1.4 billion privatisation offer for all remaining shares of Great Eastern (SGX: G07). This offer values Great Eastern at $25.60 per share. Understanding acquisition or privatisation offers for publicly listed companies isn’t too difficult for those with a basic knowledge of corporate finance or some experience in share investment. Typically, the acquiring company, known as the offeror, makes an offer at a premium to the last traded share price of the stock. This premium can be seen as a win for existing shareholders since they’re offered more than they would have received by selling their stocks on the exchange before the offer. From an existing shareholder’s perspective, the options are relatively straightforward. But is it always that straightforward? In this week’s edition of , we delve into four key aspects of OCBC’s offer for Great Eastern and explore why it might be more complex than it seems. The first thing to note is that OCBC already owns most of Great Eastern (GE) shares. In fact, many OCBC bank customers already associate GE as the insurance arm of OCBC. The bigger surprise for some might be discovering that Great Eastern is actually a stock traded on the SGX. Let’s take a quick look at the history. Prior to 2004, OCBC had a non-controlling stake of 48.8% in Great Eastern. However, a share exchange offer increased OCBC’s ownership to 81.1%, giving it a controlling stake (more than 50%). Another offer was made in 2006, further increasing OCBC’s ownership to 86.9%. You can read this for a more comprehensive understanding of this. Since OCBC has owned an overwhelming majority of GE shares since 2006 and has made two offers for its shares in the past two decades, it’s clear that it values Great Eastern as an integral part of its group. OCBC has continued to increase its ownership in GE over the years by regularly buying more shares. For example, as of 2 March 2009, OCBC owns 87.06% of GE shares. As of 29 February 2016, this has increased to 87.60%. As of 1 March 2023, this has increased to 87.91% As of 5 March 2024, this has increased to 88.45% The point here is that since it obtained more than 80% of GE shares in 2004, OCBC has consistently increased its interest in Great Eastern. As of March 5, 2024, OCBC holds 88.45% of GE shares, leaving only 11.55% held by the public. This is close to the SGX minimum requirement, which mandates that at least 10% of the total issued shares must be held by the public. If the percentage of shares held by the public falls below 10%, the exchange may suspend trading of GE shares.  Such a suspension would be unfavourable for remaining investors, as it would halt share trading. Even if the public holding remains slightly above 10%, concerns may arise among shareholders about the proximity to the minimum threshold, potentially prompting some to sell their shares to avoid holding a stock that could be suspended from trading. If trading is suspended due to not meeting the 10% free float requirement, remaining shareholders will find it difficult to sell their shares. This reduced liquidity could further depress the stock’s price. This is perhaps why it makes sense that OCBC make its voluntary unconditional general offer to all other shareholders. However, the rule for delisting a company isn’t as simple as buying up as many shares as possible, and in some cases, it can be quite complicated. To apply to SGX for delisting, SGX Listing Rules stipulate that SGX may agree to a Voluntary Delisting if two conditions are met. Firstly, OCBC has: 1) , 2) , and 3) . As a result, there are fewer public shares available that are held by shareholders, excluding OCBC. According to a , when the offer was made, OCBC was deemed to own 88.67% of Great Eastern. Mathematically, to acquire at least 75% of the total number of issued shares held by independent shareholders, OCBC needs to acquire an additional 8.5% of shares, reaching a total shareholding of 97.17%. Here are a few important points to consider if you are an existing GE shareholder: A “fair and reasonable offer” is also required based on the Listing Rules. Unfortunately, this, too, has not been met since an independent financial adviser (IFA) assessed it to be “not fair but reasonable.” OCBC’s point in this matter is that its offer price of $25.60 represents a You can . We won’t comment on what we think a fair valuation should be, as we are not investment experts and there is plenty of content on this topic written by others. However, it is worth noting the following: While OCBC cannot compel any remaining GE shareholders to sell unless it acquires an additional 10.2% of shares, the company’s shares could remain suspended or even be delisted in the future. This would significantly reduce liquidity and increase uncertainty for the remaining investors regarding the company’s future. In their response to SIAS questions on 27 June 2024, OCBC shared that as of 6 pm on 26 June 2024, OCBC had “received acceptances for 6,797,334 GE shares and acquired 1,762,100 GE shares through market purchases, In other words, under SGX listing rules, if the free float falls below 10%, GE stocks are likely to be suspended from trading after OCBC’s offer closes on July 12. OCBC could choose to sell GE stocks to meet the 10% free float requirement, but this would likely need to be at a discount to the offered price (otherwise, who would buy it?) and contrary to what they have been doing over the last two decades. If that happens, all existing shareholders, including OCBC, would be worse off. Existing shareholders could have sold at a higher price, while OCBC would have to release shares that they previously bought at a higher price. It's free! Don't miss out on the latest financial market movements. FSMOne aims to help investors around the world invest globally and profitably, follow for bite-sized finance analyses and exclusive happenings. is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.