Oversea-Chinese Banking Corp. offered HK$38.4 billion ($6.3 billion) to buy Wing Hang Bank in the biggest takeover of a Hong Kong lender since 2001 to gain a foothold in the expanding Chinese financial hub.

Southeast Asia’s second-largest lender will pay HK$125 a share in cash, it said in a statement today. That represents a 1.6% premium to the last traded price on March 28. The family of Chairman Patrick Fung, Bank of New York Mellon Corp. and other shareholders holding a combined 50.66% of Wing Hang have accepted the offer, according to the release.

The acquisition will give OCBC more access to business in China as Hong Kong’s role in cross-border financing increases. It’s the largest takeover of a Hong Kong bank since DBS Group Holdings, OCBC’s largest competitor in Singapore, offered US$5.3 billion ($6.7 billion) for Dao Heng Bank Group in April 2001.

“OCBC gets a meaningful operational foothold in Hong Kong and southern China through this deal,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia, wrote in a note. The transaction “offers investors a meaningful alternative to DBS as the second Singapore bank with a retail banking presence in Hong Kong.”

Wing Hang Bank’s investors will be entitled to a dividend of as much as 46 Hong Kong cents per share if the takeover is approved by stockholders, according to today’s statement.

OCBC shares rose 0.1% to $9.52 as of 9:11 a.m. Wing Hang shares are due to resume trading today following a suspension. The Hong Kong lender’s stock surged 49% in the 12 months through last week.

Exclusive Talks

OCBC secured preliminary approval from the Hong Kong Monetary Authority for the acquisition, people familiar with the matter said on March 28, leading to a surge in Wing Hang shares before trading was suspended that day. The Singaporean bank entered exclusive talks with Wing Hang’s largest shareholders last year that were set to expire on March 31.

The offer is 1.77 times Wing Hang’s “consolidated net book value” as of Dec. 31, the banks said. It is 11% above Wing Hang’s March 27 closing price, the day before Bloomberg News reported on the HKMA approval.

Hong Kong lenders are proving attractive to mainland companies including China Merchants Bank Co. as they seek expansion abroad. Foreign firms are interested in the city’s lenders to tap the Chinese market as the yuan becomes more widely used for finance.

Dim Sum Debt

Outstanding loans in Hong Kong made in China’s currency surged 46% last year to 115.6 billion yuan ($23.4 billion), HKMA data show. Sales of yuan-denominated debt securities, known as Dim Sum bonds, rose 27% to 344.3 billion yuan.

Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China. Its presence across southern China’s Pearl River Delta makes it a more attractive target than other smaller family-owned banks in the city, Grace Wu, an analyst at Daiwa Capital Markets Hong Kong, said by phone Sept 17.

The acquisition will put OCBC “in a position to capitalize on increasing trade, capital and wealth flows between Greater China and Southeast Asia,” the companies said in today’s statement.

OCBC will keep all Wing Hang employees for 18 months after the deal is closed, according to the statement.

China Merchants Bank paid US$4.7 billion for the Wu family’s Wing Lung Bank in a deal completed in 2009. Three years earlier, China Construction Bank Corp., the country’s second-largest lender, bought Bank of America Corp.’s Hong Kong and Macau unit for US$1.24 billion. In 2000, larger rival Industrial & Commercial Bank of China paid US$231 million for control of Union Bank of Hong Kong.

‘Crazy’ Valuations

The OCBC-Wing Hang transaction follows Yue Xiu Group’s US$1.5 billion offer to buy a majority stake in family-owned Chong Hing Bank, which was approved by Hong Kong’s banking regulator on Jan. 9.

China Merchants Bank’s purchase of Wing Lung Bank valued the lender at 3.1 times book value, data compiled by Bloomberg show. Australia & New Zealand Banking Group Ltd.’s Chief Executive Officer Michael Smith, who lost in the bidding, called that ratio “crazy.”

Hong Kong banks remain overpriced, Smith said Oct. 8, describing a multiple of two times book value as “ridiculous at these times.”