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Can United Engineers Limited Scale Greater Heights?

News first broke in August 2014 that Oversea-Chinese Banking Corp Limited (SGX: O39) and Great Eastern Holding Limited (SGX: G07) might be planning to sell their stakes in property services and environmental engineering outfit United Engineers Limited (SGX: U04).

Interestingly, the party that was interested in buying up their stake is none other than Thai billionaire Charoen Sirivadhanabhakdi, the businessman who controls Thai Beverage Public Company Limited (SGX: Y92).

But while Sirivadhanabhakdi had successfully struck a deal with OCBC to buy over the bank’s stake in Fraser & Neave Limited (SGX: F99) back in 2012, a transaction involving United Engineers’ shares has failed to materialise this time around. In February, exclusive talks between OCBC and TCC Group, Sirivadhanabhakdi’s investment vehicle, had ended without a deal.

It’s been more than two months since the talks broke down, but it’s still worth it for United Engineers’ shareholders to think about what’s next.

Business-wise, the company’s a conglomerate with a long history. Most of its operations are stable and well-established. As such, there won’t seem to be much impact even if there’s no deal made for United Engineers’ shares.

But, there’s another angle to this issue when we think of how United Engineers is both a tiny and legacy asset for OCBC and Great Eastern. Given such a dynamic, it’s my opinion that both OCBC and Great Eastern would not have much interest in pushing United Engineers to grow.

The fact that the two financial institutions (namely OCBC and Great Eastern) had been looking for buyers for United Engineers is a good indication of their interest (or rather, lack thereof) in the environmental engineering company.

So, if United Engineers would gain new big shareholders, the buyer might be more interested in growing the business as it would want to extract more value from the purchase.

Foolish Summary

OCBC and Great Eastern might very well be pursuing other buyers for their stake in United Engineers. But whatever the case, the direction of United Engineers’ business might have a high dependence on whether there’d be any new big shareholders.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any companies mentioned above.