Public Bank Berhad's HK$734.7 million plan to take its Hong Kong unit, Public Financial Holdings, private is heading to a shareholder vote on Nov. 23 after an independent adviser said the HK$2.50-a-share cash offer is fair and reasonable to minority investors.

The scheme document, filed with the Hong Kong stock exchange on Friday, Oct. 30, sets the court meeting and special general meeting for the morning of Nov. 23 in Tsim Sha Tsui East. Somerley Capital, appointed by the Public Financial board as independent financial adviser, recommended that disinterested shareholders vote in favour. The deal shows how a regional lender exits a thinly traded Hong Kong listing that has long sat far below book value, and how the 2026 rise in long-term rates is squeezing lenders with fixed-rate loan books.

Public Bank's offer for Public Financial Holdings

Malaysia's Public Bank owns 804.0 million shares, about 73.23%, and is offering cash for the remaining 293.9 million (26.77%) under a scheme of arrangement in Bermuda, where Public Financial is incorporated. The total bill of HK$734.7 million, roughly RM378.6 million according to The Star, will be paid from Public Bank's internal cash. Public Bank has said the price is final and will not be raised.

The HK$2.50 price is 61.3% above the HK$1.55 close on Aug. 19, the last trading day before the plan was announced in September, and 78.6% above the 30-day average. It is also about 64.7% below the unaudited net asset value of HK$7.08 a share at June 30. Public Bank argued that book value has never been within reach for outside holders: over the two years before the announcement, the stock traded at discounts of 74% to 85% to net asset value, and average daily turnover in the year to Aug. 19 was about HK$414,000.

Public Bank also compared its premium with successful Hong Kong privatisations documented in 2025 and 2026 and completed before Aug. 19. Those deals paid between a 12.2% discount and a 250% premium to the last undisturbed price, with an average premium of 50.8% and a median of 35.4%, the scheme document said. Public Bank's 61.3% sits above both.

Public Financial shares jumped 41.9% to HK$2.20 when trading resumed on Sept. 9 and closed at HK$2.25 on Oct. 27, a 10% discount to the offer, according to Somerley's letter.

Goodwill write-off reshapes the numbers

On Oct. 16, Public Financial warned that it would write off the full HK$1.964 billion of goodwill on its balance sheet and expects a loss after tax of HK$1.9 billion to HK$2.0 billion for 2026, against a profit of about HK$80 million in 2025. The write-off cuts net asset value by about HK$1.8 a share, the company said.

The company tied the charge to a surge in long-term market interest rates since the third quarter, which raised the discount rate used in its goodwill test, and to weaker medium-term cash flow forecasts. Most of its lending is fixed-rate or linked to the Hong Kong dollar prime rate, which tends to stay flat through rate cycles, so higher funding costs flow straight into thinner margins. Somerley's letter noted that the Hong Kong Monetary Authority lifted its base rate to 4.25% after the U.S. Federal Reserve's 25-basis-point increase in mid-September, while local banks left their best lending rates at 5.00% to 5.50%. The HKMA set the base rate at 4.25% on Sept. 17, and the Fed held its range at 3.75% to 4% on Oct. 28. Somerley also cited weak commercial property and strain on small businesses. Hong Kong lending overall has held up better: bank loans rose 7.7% this year through September, led by trade finance.

Public Financial said the charge is a non-cash, group-level item that does not affect its operating units, Public Bank (Hong Kong) and Public Finance. The scheme document puts their consolidated common equity Tier 1 ratio above 25.5%.

For the parent, the hit is small. S&P Global Ratings said on Oct. 19 that Hong Kong accounted for less than 5% of Public Bank's assets and about 1% of its pre-tax profit in 2025, and that it expects the Malaysian bank's risk-adjusted capital ratio to stay above 9% over the next two years after the impairment, the buyout and a RM3.5 billion special dividend plan, The Star reported. S&P rates Public Bank A- with a stable outlook.

What minority holders vote on

No independent board committee was formed because every non-executive and independent director of Public Financial is tied to Public Bank through board seats, shareholdings or both. That leaves Somerley's letter as the main independent view.

To pass, the scheme needs approval by at least 75% of the votes cast by disinterested shareholders at the court meeting, with votes against no more than 10% of all disinterested shares, along with a majority in number and three-quarters in value of scheme shares voted. A special resolution at the general meeting must also pass. Public Bank cannot vote at the court meeting.

If the votes pass, the last day of trading is expected to be Nov. 24. The Supreme Court of Bermuda is scheduled to hear the petition to sanction the scheme on Dec. 4, Bermuda time, with the scheme expected to take effect on Dec. 7 and cash to be paid within seven business days after that. The long stop date is March 8, 2027.