Just as the market was heading towards a period of listless trading due to the World Cup and prevailing cautious sentiments, trading in three financial institutions are being suspended today, paving the way for the formation of Malaysia’s biggest bank.
The trading of RHB Capital Bhd, Malaysia Building Society Bhd (MBSB) and CIMB Group Holdings Bhd are suspended today, all three told Bursa Malaysia separately yesterday.
It is learnt that the three banks will write to Bank Negara to seek permission to commence a corporate exercise which will result in a mega bank that will have a market capitalisation of more than RM90bil, assuming the deal is concluded at about 1.70 to 1.75 times book value.
“The deal is likely to be done at 1.75 times book value based on CIMB’s current valuation of almost 1.70 times book. It is unlikely to be transacted at anything less,” said a source.
At 1.75 times book value, RHB Cap would have a market capitalisation of about RM30bil, while MBSB’s total capitalisation would be about RM6.8bil.
It is learnt that the three banks will write to Bank Negara to seek permission to commence a corporate exercise which will result in a mega bank that will have a market capitalisation of more than RM90bil, assuming the deal is concluded at about 1.70 to 1.75 times book value.
“The deal is likely to be done at 1.75 times book value based on CIMB’s current valuation of almost 1.70 times book. It is unlikely to be transacted at anything less,” said a source.
“Together with CIMB’s market capitalisation, the merged entity would fetch a market value of more than RM90bil,” said the source.
The Employees Provident Fund (EPF) will play a significant role in this merger because it has significant stakes in all three entities.
It is the major shareholder in RHB Cap with a 40.76% stake. The other major shareholders of RHB Cap are Aabar Investments PJSC with a 21.43% stake and OSK Holdings Bhd with a 9.91% stake.
The EPF has a 64.73% stake in MBSB and 14.46% in CIMB.
The eventual merger will see the EPF emerge as the largest shareholder in the mega bank, with a stake estimated to be more than 25%.
RHB Cap and CIMB closed four sen lower each at RM8.72 and RM7.24 respectively, while MBSB ended 12 sen higher at RM2.34 at yesterday’s market close.
At the close yesterday, CIMB was trading at 1.70 times book value, RHB Cap at 1.29 times book value and MBSB at 1.60 times book value.
Sources said the exercise would possibly involve a share swap between CIMB and RHB Cap at a book value of 1.75 times and an outright buyout of MBSB.
MBSB is a building society whose loans are mainly for residential loans and commands a lesser premium.
“But it is probably one of the most profitable financial institutions and has the fastest growing balance sheet. This is evident from the returns it has given to its shareholders in the last two years,” said an analyst.
A merger of the three financial institutions will result in a bank with the largest asset base, market capitalisation and earnings based on the latest published numbers.
The EPF has a 64.73% stake in MBSB and 14.46% in CIMB.
The eventual merger will see the EPF emerge as the largest shareholder in the mega bank, with a stake estimated to be more than 25%.
RHB Cap and CIMB closed four sen lower each at RM8.72 and RM7.24 respectively, while MBSB ended 12 sen higher at RM2.34 at yesterday’s market close.
At the close yesterday, CIMB was trading at 1.70 times book value, RHB Cap at 1.29 times book value and MBSB at 1.60 times book value.
Sources said the exercise would possibly involve a share swap between CIMB and RHB Cap at a book value of 1.75 times and an outright buyout of MBSB.
MBSB is a building society whose loans are mainly for residential loans and commands a lesser premium.
“But it is probably one of the most profitable financial institutions and has the fastest growing balance sheet. This is evident from the returns it has given to its shareholders in the last two years,” said an analyst.
A merger of the three financial institutions will result in a bank with the largest asset base, market capitalisation and earnings based on the latest published numbers.
Based on latest figures, the merged entity’s asset size is expected to be more than RM600bil and combined profits based on its last financial year will exceed RM7bil. It will surpass that of Malayan Banking Bhd (Maybank) that has a market capitalisation of RM91.1bil currently and asset size of RM578bil as of March 31 this year.
Opinion:
a) The deal kinda saved MBSB and the people 'promoting' it as it was hit very hard by Bank Negara recent rulings (correctly), if you know what I mean. By keeping all the loans under a much bigger loan entity, somehow things will become very David Blainish. Will also save EPF from future blushes.
b) Kinda murky with Nazir becoming Chairman of CIMB, and probably elevated to a directorship at Khazanah, plus a significant role at EPF investment panel. Surely Nazir did not do anything to suggest such a merger. At least now we understand the rash and rushed move to resign as CEO and be made Chairman, plus the Khazanah's role better. Hmm...
Opinion:
a) The deal kinda saved MBSB and the people 'promoting' it as it was hit very hard by Bank Negara recent rulings (correctly), if you know what I mean. By keeping all the loans under a much bigger loan entity, somehow things will become very David Blainish. Will also save EPF from future blushes.
b) Kinda murky with Nazir becoming Chairman of CIMB, and probably elevated to a directorship at Khazanah, plus a significant role at EPF investment panel. Surely Nazir did not do anything to suggest such a merger. At least now we understand the rash and rushed move to resign as CEO and be made Chairman, plus the Khazanah's role better. Hmm...
c) The deal is very good for RHB shareholders but the Aabar Group's block could still be tricky as their entry price was much higher. However there seemed to be more willingness by Middle Eastern big investors to finally take their losses and move on (e.g. recent Iskandar land deal).
d) This deal would be negative for Maybank and and negative for the rest of the smaller banks, by sheer size muscling through the industry. Hence Maybank is UNLIKELY to sit back and do nothing, but its common shareholder in this is EPF and that may be sufficient to be having a phone conversation along the lines"You do what you think is best for the company, but remember who you are going against ..."
d) This deal would be negative for Maybank and and negative for the rest of the smaller banks, by sheer size muscling through the industry. Hence Maybank is UNLIKELY to sit back and do nothing, but its common shareholder in this is EPF and that may be sufficient to be having a phone conversation along the lines"You do what you think is best for the company, but remember who you are going against ..."
e) This deal will go through. Ong Leong Huat will be much richer. More IB staffers will lose jobs ... how they wished they could be part of the "bank tellers union".
f) At the end of the day, the merger is natural, necessary, plus can cover some blots (if you know what I mean) ... and prepare for the ultimate on the agenda list ... having an entity large enough to propose a merger with Public Bank in the end. EPF being the driver could do that deal, but not Maybank. Kapisch!
f) At the end of the day, the merger is natural, necessary, plus can cover some blots (if you know what I mean) ... and prepare for the ultimate on the agenda list ... having an entity large enough to propose a merger with Public Bank in the end. EPF being the driver could do that deal, but not Maybank. Kapisch!
0 comments:
Post a Comment