Highlight RHBCap likely to buy CIMB’s biz

by **Cals** Fri 22 Aug 2014, 12:36

Highlight RHBCap likely to buy CIMB’s biz

Business & Markets 2014

Written by Joyce Goh of theedgemalaysia.com

Friday, 22 August 2014 08:44

KUALA LUMPUR: RHB Capital Bhd (RHBCap) could become the holding company if plans to merge it with CIMB Group Holdings Bhd and Malaysia Building Society Bhd (MBSB) materialise.

Sources said one of the routes being considered currently is for CIMB Group to sell its entire banking business to RHBCap to be paid by an issuance of new RHBCap shares.

This proposed scheme is contrary to popular belief that CIMB Group will be the acquirer in the mega merger and end up the holding company.

Once RHBCap takes over CIMB Group’s banking assets, the commercial and investment banking businesses of both groups will be consolidated.

As part of the step-by-step merger, RHB Islamic Bhd will subsequently sell its entire business, in exchange for shares, to CIMB Islamic Bhd, which will end up being the vehicle for the merged Islamic banking businesses.

The last step will see the Employees Provident Fund (EPF), which owns 64.6% of MBSB, making an offer to take out the minority shareholders and once that is done, MBSB’s businesses will be injected into the enlarged Islamic bank.

Sources said this route to merger is preferred over an outright purchase of RHBCap of its assets as this will likely be blocked by Abu Dhabi-based Aabar Investments, which had made clear its objection to any sale unless it is at a price it is happy with.

In order for RHBCap to push through a sale of assets, it will need support from 75% of its shareholders. Aabar owns 21.2% of RHBCap.

On the other hand, RHBCap will need only 50% plus one share from its shareholders to buy CIMB Group’s business.

Sources, who have seen merger documents prepared for deliberations, said if the merger takes place as proposed, the EPF will end up as the single largest shareholder in the merged entity with a 22.3% stake, followed by Khazanah Nasional Bhd with 20.8%.

The other substantial shareholders will be Aabar with 6.1%, Mitsubishi UFJ (3.3%) and OSK Holdings Bhd (2.8%).

Currently, the EPF has a 41.5% stake in RHBCap and 14.6% in CIMB Group while Khazanah has a stake only in CIMB Group of 29.2%.

Mitsubishi presently has 4.6% of CIMB Group and OSK Holdings Bhd has 9.9% of RHBCap.

Interestingly, the shares of CIMB Group have been on the uptrend since Monday. They closed at RM7.12 yesterday, up 2.6% in four days from its close of RM6.94 on Monday.

Trading volume of CIMB Group has also been high, with 12.86 million shares traded on Wednesday, up 41.5% from its 52-week average trading volume of 12.86 million shares. Meanwhile, RHBCap’s stock touched its 52-week closing high of RM9.50 on Tuesday and ended at RM9.45 yesterday.

The market capitalisation of CIMB Group and RHBCap stood at RM59.3 billion and RM24.3 billion respectively.

This article first appeared in The Edge Financial Daily, on August 22, 2014.