Bank Negara nod for RHB stake sale

Aabar expected to pay RM10.80 per share to ADCB
PETALING JAYA: [url=http://archives.thestar.com.my/search/?q=Abu Dhabi Commercial Bank Bhd (ADCB)]Abu Dhabi Commercial Bank Bhd (ADCB)[/url] has received the green light from [url=http://archives.thestar.com.my/search/?q=Bank Negara]Bank Negara[/url] to sell its 25% stake in [url=http://archives.thestar.com.my/search/?q=RHB Capital Bhd]RHB Capital Bhd[/url] to sister company Aabar Investments PJSC. The sale to be signed tomorrow, said a source, is pegged at RM10.80 per share or 2.25 times the book value of [url=http://archives.thestar.com.my/search/?q=RHB Cap]RHB Cap[/url] as at end-March.
The source said following [url=http://archives.thestar.com.my/search/?q=Malayan Banking Bhd]Malayan Banking Bhd[/url] and [url=http://archives.thestar.com.my/search/?q=CIMB Group Holdings Bhd]CIMB Group Holdings Bhd[/url]'s move end-May to seek Bank Negara's permission to negotiate on the takeover of RHB Cap, ADCB had submitted a formal letter to the central bank seeking “no objection” to go ahead and discuss with three shortlisted potential bidders Aabar, the [url=http://archives.thestar.com.my/search/?q=Carlyle Group]Carlyle Group[/url] and Japan's [url=http://archives.thestar.com.my/search/?q=Sumitomo Mitsui Financial Group (SMFG)]Sumitomo Mitsui Financial Group (SMFG)[/url].
“It had clearly indicated that it wanted to fast track discussions with Aabar and sign the sale and purchase agreement on June 17 in time for the Crown Prince's visit,” said a source. The central bank recently approved the stake sale.
(Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan is scheduled to make an official visit to Malaysia tomorrow.)
“The sale by ADCB of its interest in RHB Cap is part of an internal portfolio reorganisation but one that will continue to involve [url=http://archives.thestar.com.my/search/?q=Abu Dhabi Inc]Abu Dhabi Inc[/url]'s support in Malaysian investments. ADCB is not deemed a suitable long-term shareholder because of the upcoming onerous Basel III rules. It is best to park the stake in Aabar which already has global financial sector investments and doesn't have issues related to capital adequacy,” said a source.
Meanwhile, a note by Middle East-based investment bank HC Securities & Investment said ADCB would be hit hard by the introduction of the Basel III global banking rule, which essentially means banks having to hold more capital.
“ADCB's common equity is likely to come under pressure due to Basel III, as it relies heavily on Tier 1 bonds and substantial investments in financial institutions,” the bank said.
StarBiz had earlier reported that ADCB was likely to be in need of cash to settle some of its debts that would mature soon. This partly explains the rationale behind ADCB's plans to hive off its 25% stake in RHB Cap to Aabar Investments.
Aabar is the Abu Dhabi government's investment vehicle and is 94.5% owned by the International Petroleum Investment Company (IPIC). IPIC, wholly owned by the government, owns stakes in energy majors namely Austria's OMV and Cepsa and, through Aabar, also has interests in German carmaker Daimler and Virgin Galactic and has been on an aggressive expansion drive in recent years.
The sale of the 25% interest represents a 9.5% premium over RHB Cap's last traded price on Wednesday of RM9.86.
“Generally, a 25% stake has a strategic value ... such blocks don't come too often to the market, hence they command a premium,” said a source.
ADCB acquired the block back in May 2008 at RM7.20 per share versus the market price of RM5.70.
The main question is would the sale of this strategic block set a pricing benchmark for Maybank and/or CIMB's bid to take over RHB Cap?
“Yes,” said one source. “Maybank and CIMB should pay what RHB Cap is worth and not suppress minority shareholder interests. On the other hand, the majority shareholder is the Employees Provident Fund. Their right to get the best price for their shares in RHB Cap should not be supressed either,” the source added.