A nice way
To court an old bank
Two traditional Chinese bankers struck a deal and taught the new corporate world a thing or two about takeovers it never learned elsewhere and Singaporeans love the outcome.
July 1, 2001

It's the one to offer the bigger pot that wins in a merger - usually.

But in taking over an old Chinese bank with a history of a quarter of a century from its founder, a special "X" factor is needed.

Looking at the deal closely, it is obvious the United Overseas Bank's success in winning over 95-year-old Lien Ying Chow is not just this cultural factor alone.

If it is just that, it would have failed.

Both UOB's Wee Cho Yaw, 72, and Mr. Lien, who controls OUB, are hard-headed businessmen who know what is a good deal. They have also spent a great deal of their lives competing with each other.

DBS lost to a better deal.

Mr. Wee won because he put more money on the table and nailed Mr. Lien's nod by agreeing to a supplementary deal to sell him his property assets.

But the special "X" factor was a tremendous help. It gave Mr. Wee a big advantage over the DBS corporate managers.

He is Chinese and understands Mr. Lien and realises the importance of face and respect that need to be accorded to a man of his stature and history.

He is Hokkien, Mr. Lien is Teochew. Both men are prominent clan figures who have contributed much to the Chinese community and to Singapore. This networking gave them an affinity.

The two banks have a combined history of 118 years.

OUB was established in 1949; Mr. Lien steered it through turbulent times. UOB was founded by Mr. Wee's father in 1935.

It was a bad mistake for DBS to treat OUB as just another takeover target like the rest it had accumulated elsewhere and Mr. Lien as retired, unimportant.

I understand the approach was made CEO to CEO not by DBS chairman S. Dhanabalan to Mr. Lien. That, if true, was a mistake.

No one knows if the rejected suitor will raise the bid and win over the hostility of Mr. Lien.

When Lien heard it, he reportedly broke down but his wife Margaret denied it. Very upset, yes but broke down, never, she said.

The aged banker did not show up at the touching press conference. Margaret spoke of his deep sadness and recounted how he had steered the family bank through tough times and turned it into a modern bank.

The Hokkien banker paid a call on Mr. Lien and in an emotional meeting struck a deal for about S$10 billion (half in cash,) slightly higher than the DBS bid but a lot more cash.

Mr. Wee bowed low to Mrs. Lien before she spoke. When his turn came, Wee paid a glowing tribute to Lien's role to Singapore and offered him the position of Honorary Life Counsellor at UOB as a tribute.

Wee will be chairman and chief executive of the combined entity. The whole OUB board would be invited to join in the new board if the bid succeeds, he said.

The episode shows that despite the city's modernity and globalisation, culture and traditional friendship still play a major part in the corporate world, including banking.

When the "big bang" is completed Singapore will have three big domestic banks, instead of five.

They will then have the size to acquire foreign banks and compete with the big banks from USA, Western Europe and japan in the region.

At the same time, family-controlled Overseas Chinese Banking Corporation (1932) wants to take over the smallish Keppel-Tat Lee Bank.

These take-overs worry many people, including virtually all banking employees, their small-time customers and - at least in the short term - some shareholders.

The share prices of the purchasing banks are taking a knee-jerk punishment.

Most concerned are bank employees, from executives to receptionists, who fear retrenchment or early retirement because of the mergers. Thousands may be asked to go.

They know this time retrenched workers cannot simply walk into another bank and find a job. It will also mean a sharp loss of general employment.

It will turn up a redundancy of 30-50 per cent of the work force but retrenchment will probably be less and spread over years to minimise pain.

Many small customers are also worried.

Since the announcements, many have flooded the phone lines with queries. "Will my loans be refused?" "Will my mortgage be affected?" they wanted to know.

Many fear that big banks are bad for small customers.

Over decades, small family banks had often operated on trust when dealing with established customers rather than strict banking regulations.

They are readier to help long-time customers who need help most and avoid the label of an institution which "gives you an umbrella when the sky is clear and takes it away when it rains."

Some Singaporeans did not feel sanguine about the DBS bid, remembering how it took over POSBank, the poor man's bank, closed 37 branches and raised fees for lower-paid workers.

Those who believe DBS' strong corporate culture is bad for small timers are cheering its defeat over OUB.

Seah Chiang Nee

© Copyrights 2001: All material on this site, except where otherwise accredited, is copyright to LittleSpeck.com. Media or users are welcome to quote from articles on this site but only with the expressed permission of the owner and with attribution to the website or as part of any commercial service without the prior written or expressed permission of the owner of the website.