Edge Weekly CIMB-RHB –MBSB merger to take centre stage in M’sia M&A landscape

by **Cals** Mon 14 Jul 2014, 02:53

Edge Weekly CIMB-RHB –MBSB merger to take centre stage in M’sia M&A landscape

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Saturday, 12 July 2014 10:57

KUALA LUMPUR (July 12): The planned merger of CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) is seen taking centre stage in coming months in the Malaysian merger and acquisition landscape.

The Edge Malaysia business and investment weekly (Edge Weekly) reported in its latest July 14-20 issue that the merger would be the largest in the local financial industry, which was seen contending with challenging growth prospects.

"Suddenly, an industry faced with dull growth prospects amid growing competition is abuzz again.

"In the coming months, all eyes will be on the negotiations, as it will be the largest banking merger in a very long time and which could potentially change the current landscape," the Edge Weekly reported.

According to the Edge Weekly, CIMB, RHB Capital and MBSB representatives had met yesterday (July 11) to kickstart negotiations to create the country’s largest banking group.

The three financial institutions have agreed to negotiate exclusively over 90 days, which effectively blocks any competing bids during the period.

Quoting CIMB group CEO Datuk Seri Nazir Razak, the Edge Weekly reported that, at initial glance, the merger was deemed a value-creating exercise.

But Nazir said detailed talks were crucial to validate the merits of the exercise.

“There is a prima facie case for a value-creating merger between the three entities and we want to get into detailed discussions to validate it,” Nazir, who is relinquishing his post to become CIMB chairman on Sept 1, was quoted as saying.

Sources told the Edge Weekly that merger negotiations, which were still at an early stage, were focused on potential synergies, without getting to the difficult aspect of pricing yet.

It was indicated that although talks were still in the early stage, the market was already speculating how the exercise would unfold in the coming weeks.

"Sources say the plan involves, as a first step, a merger between CIMB and RHBCap. The merger will be effected via a share swap, the sources add.

"The next stage will involve merging the enlarged group’s Islamic banking operations with MBSB to create what is described as a mega Islamic bank.

The enlarged CIMB-RHBCap banking group will then end up with a controlling stake in the Islamic bank," the Edge Weekly reported.

As the merger talks progress, several corporate captains will be closely watched.

The Edge Weekly said besides CIMB's Nazir, the spotlight would also be on the Employees Provident Fund (EPF) CEO Datuk Shahril Ridza Ridzuan, RHB Capital group managing director Kellee Kam and MBSB CEO Datuk Ahmad Zaini Othman.

The is because the EPF is the common major shareholder in all three financial institutions. The EPF owns 41.34% in RHB Capital, 65.02% in MBSB and 14.46 % in CIMB.

Government-owned investment arm Khazanah Nasional Bhd, meanwhile, is the largest shareholder in CIMB with a 29.19 % stake.

"The EPF is expected to emerge as the largest shareholder in the merged entity. The proposed merger is believed to be initiated by CIMB, together with the EPF and Khazanah," the Edge Weekly said.

For a better understanding on the dynamics of the CIMB-RHB Capital-MBSB merger, kindly pick up and read the latest issue of the Edge Weekly.