THE DEVELOPMENT BANK OF SINGAPORE LTD
(Incorporated in the Republic of Singapore)
JOINT ANNOUNCEMENT
PROPOSED SCHEME OF ARRANGEMENT TO REORGANISE THE SHARE CAPITAL OF THE INSURANCE CORPORATION OF SINGAPORE LIMITED FOR THE PURPOSE OF THE PRIVATISATION OF THE INSURANCE CORPORATION OF SINGAPORE LIMITED
DBS Group Holdings Ltd ("DBSH") and The Development Bank of Singapore Ltd ("DBS Bank") (together the "Companies") wish to announce that a proposed scheme of arrangement (the "Scheme") to reorganise the share capital of The Insurance Corporation of Singapore Limited ("ICS") for the purpose of privatising ICS, has been presented to the ICS board of directors.
INTRODUCTION
The issued share capital of ICS comprises 50,592,052 ordinary shares of $1.00 each (the "ICS Shares"). DBSH, through its wholly-owned subsidiary DBS Bank, owns 24,878,125 ICS Shares (the "Excluded ICS Shares"), representing 49.2 per cent. of the issued share capital of ICS. The Scheme is proposed to all of the shareholders of ICS except DBS Bank (the "Scheme Shareholders").
The Scheme involves, inter alia, the cancellation of the ICS Shares owned by the Scheme Shareholders in exchange for new ordinary shares of $1.00 each in the capital of DBSH (the "DBSH Shares") to be issued to the Scheme Shareholders (the "Share Exchange"). Alternatively, Scheme Shareholders may elect to receive cash, in which case DBS Bank will acquire their ICS Shares for S$5.50 in cash for every ICS share held (the "Cash Consideration"). Each Scheme Shareholder will have a choice of either accepting the DBSH Shares from DBSH or the cash consideration from DBS Bank under the Scheme. Further details of the Scheme are set out below.
Upon completion of the Scheme, DBSH will directly and indirectly through DBS Bank own 100 per cent. of the issued share capital of ICS (the "Privatisation").
THE PROPOSED SCHEME
The Scheme will involve principally the following:-
(a) for those Scheme Shareholders who elect for the Share Exchange, they will receive 310.88083 DBSH Shares for every 1,000 ICS Shares held (the "Share Exchange Ratio"). The actual number of new DBSH Shares which a Scheme Shareholder will receive will be calculated such that the resultant fraction of a new DBSH Share will be disregarded;
(b) for those Scheme Shareholders who elect to receive cash, DBS Bank will acquire their ICS Shares at S$5.50 per ICS Share to be paid in cash by DBS Bank;
(c) ICS Shares will, following completion of the Scheme, be removed from the Official List of the Stock Exchange of Singapore Limited (the "SES").
The Share Exchange values ICS at S$303.6 million while the Cash Consideration values ICS at S$278.3 million.
The DBSH Shares to be issued pursuant to the Scheme shall rank, on issue, pari passu in all respects with, and shall have attached thereto, the same rights and privileges as the then issued DBSH shares.
RATIONALE FOR THE SCHEME
DBSH views the development of bancassurance as an important element in its strategy to be a world class regional bank. Bancassurance fits into DBSH's goal to offer a wide range of financial products and services to meet the needs of its customers in Singapore and in its chosen markets in the Asia Pacific region. DBSH believes that there are considerable long term growth opportunities in bancassurance as this business remains relatively undeveloped in Singapore and the other countries in Asia.
DBSH believes that bancassurance operations will be critical to ICS' future performance in view of the MAS' plans to liberalise the insurance sector. Liberalisation of the insurance sector will compel local insurance companies to strengthen their management expertise, to be more innovative in product development and sales process and to develop a world class infrastructure to remain competitive.
To date, some of ICS' insurance products are sold through DBS Bank's distribution network. DBSH is of the view that there is a need to re-structure and integrate ICS' insurance operations with DBS Bank's distribution network to achieve a successful bancassurance business. DBSH may also consider a strategic alliance with a partner with complementary expertise to facilitate the development of the bancassurance business. The development of an integrated bancassurance business will also require not only substantial resources to put in place new systems and processes, and to develop new products, but also an appropriate allocation of the associated revenues and costs. DBSH is of the view that ICS' current listing on the SES places restrictions on related party transactions between ICS and DBS Bank and this could impede the implementation of an integrated bancassurance business.
Accordingly, it is proposed that ICS be privatised by way of the Scheme. The Scheme allows Scheme Shareholders who wish to continue to participate in the growth of the bancassurance business in this region an opportunity to do so by electing to receive the Share Exchange. Scheme Shareholders who elect to receive the Share Exchange will also be able to participate in the growth and expansion of DBSH's other financial services in Singapore and in its chosen markets in the Asia Pacific region.
DBSH is aware that ICS currently distributes insurance products through other channels. DBSH intends for ICS to continue to develop these channels in line with the bancassurance strategy.
The Scheme also offers the Scheme Shareholders the following benefits:
Enhance efficiency and competitiveness of DBSH, DBS Bank and ICS
The privatisation of ICS will allow DBSH, DBS Bank and ICS to integrate their resources and expertise more fully and to improve their ability to provide competitive integrated financial services to DBS Bank's customers. In addition, the privatisation will also enable ICS' businesses to be more closely aligned with the overall strategic and financial objectives of DBSH and DBS Bank.
Provide Scheme Shareholders the opportunity to exchange their ICS Shares into a stock with greater liquidity and investor interest
The Scheme offers the Scheme Shareholders the opportunity to exchange their ICS Shares for DBSH Shares, which are more liquid than ICS Shares. This is due to several factors including the larger free float of DBSH Shares, the stronger investor interest in DBSH, as well as the DBSH Shares being a component stock of several widely followed stock indices including the Morgan Stanley Composite Index and the Straits Times Industrial Index.
Provide Scheme Shareholders with the opportunity to realise premium value for their ICS Shares
With reference to the closing prices of DBSH shares and ICS shares as at 1 October 1999 of S$19.30 and S$4.24 respectively, Scheme Shareholders who elect for the Share Exchange will be able to exchange their ICS Shares at a premium of 41.5%, if realised. Those who elect for the Cash Consideration will be able to realise their ICS Shares at a 29.7 % premium.
BASES FOR THE SHARE EXCHANGE RATIO AND CASH CONSIDERATION
The Share Exchange Ratio is derived from:
(a) Each new DBSH share being valued at S$19.30 (based on the closing price of DBSH shares as at 1 October 1999); and
(b) Each ICS share being valued at S$6.00.
The Share Exchange represents an implied premium of 41.5% to the last traded price of ICS Shares and an implied premium of 26.8% to ICS' unaudited net tangible assets value as at 30 June 1999.
The Cash Consideration represents a 29.7% premium to the last traded price of ICS Shares and a 16.3% premium to ICS' unaudited net tangible assets value as at 30 June 1999.
FINANCIAL EFFECTS
A maximum number of 7,993,967 new DBSH Shares will be issued pursuant to the Scheme if all Scheme Shareholders choose the Share Exchange. This represents an increase of approximately 0.7 per cent. in the number of DBSH Shares currently in issue. The Scheme, if implemented, would not have a material financial impact on the assets or earnings of DBSH or DBS Bank.
INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
Ng Kee Choe, N Ganesan, Bernard Chen Tien Lap, Chong Kie Cheong and Elsie Foh, who are directors or executives of either DBSH or DBS Bank, are also directors of ICS.
DBS Bank, a wholly-owned subsidiary of DBSH, holds a 49.2% interest in the issued share capital of ICS.
Save as aforesaid, none of the directors, or any substantial shareholders of DBSH or DBS Bank has any interest in the Scheme.
APPROVALS
The Privatisation is proposed to be effected by way of a scheme of arrangement under Section 210 of the Companies Act, Chapter 50. It must be approved by a majority in number of Scheme Shareholders who together represent not less than 75 per cent. in value of the ICS Shares held by those Scheme Shareholders present and voting, either in person or by proxy, at the meeting of the Scheme Shareholders convened at the direction of the High Court. The Scheme must also be sanctioned by the High Court. In addition, the Scheme must be approved by the ICS Shareholders at an extraordinary general meeting to be convened by ICS. DBS Bank will abstain from voting at these meetings.
By proposing that the Privatisation be effected through a scheme of arrangement, the Company is providing the opportunity to the Scheme Shareholders to determine at the court meeting of the Scheme Shareholders convened at the direction of the High Court whether they consider the Scheme to be in their best interests.
Upon the completion of the Scheme, ICS Shares will cease to be listed on the SES. Application will be made to the SES for the listing and quotation of the new DBSH Shares to be issued pursuant to the Scheme and for the delisting of the ICS Shares.
The privatisation of ICS is subject to the approval of the MAS.
BY ORDER OF THE RESPECTIVE BOARDS OF DIRECTORS OF THE COMPANIES
Heng Lee Cheng
Group Secretary
DBS Group Holdings Ltd
The Development Bank of Singapore Ltd
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