Kuala Lumpur: The country's two largest banks, Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd, are each expected to submit their merger proposals to RHB Capital Bhd (RHBCap) on June 29.
Read more: Banks likely to submit RHBCap plans by June 29 http://www.btimes.com.my/articles/30rhb/Article/#ixzz1Q4tQZjqX
RHBCap's board set that deadline, keen not to drag things out and prolong uncertainty for its staff, sources said. RHBCap, the fifth largest bank, is being pursued for a takeover by the two bigger banks and its staff is said to be nervous, not knowing which party the smaller bank might go to bed with, if at all. Maybank and CIMB, which began merger talks with RHBCap early this month, should have little problem meeting that deadline as each have already indicated that a proposal will be made by the month's end. It is understood that their respective talks with RHBCap are still at a relatively early stage. Details of potential synergies and duplications have yet to be ascertained. Abu Dhabi Commercial Bank's move last week in doing a "left hand-to-right-hand" sale - selling its 25 per cent stake to sister company Aabar Investments at a hefty RM10.80 a share - has dampened a potential merger, sources said. At RM10.80, or 2.25 times RHBCap's book value, it would not be cheap for either CIMB or Maybank to match. Both parties are considering share-swap proposals and have yet to decide if these may also include a small cash portion. Neither has engaged Aabar in talks as yet. "It all boils down to the swap ratio ... if they see a future in the enlarged entity, then they'll (accept shares and) stay on," said one of the sources. Both banks have expressed that it is not a "do-or-die" deal for them and that they will walk away if it gets too expensive. CIMB's current higher price-to-book value (PBV) of 2.3 times versus Maybank's 2.1 times gives CIMB greater share-swap pricing power, says OSK Research. "But both groups are well aware of potential value destruction. Given the downside risk on return-on-equity post-merger and li-mited synergistic upside, we believe that both banks are likely to exercise pricing discipline, which in our view could cap the offer price for RHBCap at below the 2.25 PBV multiple - RM10.80/-share," it said in a report yesterday. Sources also said that the banks' proposals will have to include RHBCap's operations in its entirety, and if there are any intentions to sell parts of it later, this would have to be stated in the proposal. Meanwhile, the banks' early merger talks have revealed that RHBCap can open up to 30 branches in Thailand. It only has one there so far. This is likely to excite Maybank more than CIMB, given that Maybank does not have a commercial banking presence in Thailand, which is the only major market in the region it isn't represented in. Maybank, which recently bought regional broker Kim Eng Securities, has 48 Kim Eng branches in Thailand and some of it can be converted to bank branches if the Thai authorities allow it, a source said. CIMB already has a presence in Thailand through CIMB Thai. RHBCap's share price closed at RM9.60 yesterday, up 2 sen from the previous day.
Read more: Banks likely to submit RHBCap plans by June 29 http://www.btimes.com.my/articles/30rhb/Article/#ixzz1Q4tQZjqX
RHBCap's board set that deadline, keen not to drag things out and prolong uncertainty for its staff, sources said. RHBCap, the fifth largest bank, is being pursued for a takeover by the two bigger banks and its staff is said to be nervous, not knowing which party the smaller bank might go to bed with, if at all. Maybank and CIMB, which began merger talks with RHBCap early this month, should have little problem meeting that deadline as each have already indicated that a proposal will be made by the month's end. It is understood that their respective talks with RHBCap are still at a relatively early stage. Details of potential synergies and duplications have yet to be ascertained. Abu Dhabi Commercial Bank's move last week in doing a "left hand-to-right-hand" sale - selling its 25 per cent stake to sister company Aabar Investments at a hefty RM10.80 a share - has dampened a potential merger, sources said. At RM10.80, or 2.25 times RHBCap's book value, it would not be cheap for either CIMB or Maybank to match. Both parties are considering share-swap proposals and have yet to decide if these may also include a small cash portion. Neither has engaged Aabar in talks as yet. "It all boils down to the swap ratio ... if they see a future in the enlarged entity, then they'll (accept shares and) stay on," said one of the sources. Both banks have expressed that it is not a "do-or-die" deal for them and that they will walk away if it gets too expensive. CIMB's current higher price-to-book value (PBV) of 2.3 times versus Maybank's 2.1 times gives CIMB greater share-swap pricing power, says OSK Research. "But both groups are well aware of potential value destruction. Given the downside risk on return-on-equity post-merger and li-mited synergistic upside, we believe that both banks are likely to exercise pricing discipline, which in our view could cap the offer price for RHBCap at below the 2.25 PBV multiple - RM10.80/-share," it said in a report yesterday. Sources also said that the banks' proposals will have to include RHBCap's operations in its entirety, and if there are any intentions to sell parts of it later, this would have to be stated in the proposal. Meanwhile, the banks' early merger talks have revealed that RHBCap can open up to 30 branches in Thailand. It only has one there so far. This is likely to excite Maybank more than CIMB, given that Maybank does not have a commercial banking presence in Thailand, which is the only major market in the region it isn't represented in. Maybank, which recently bought regional broker Kim Eng Securities, has 48 Kim Eng branches in Thailand and some of it can be converted to bank branches if the Thai authorities allow it, a source said. CIMB already has a presence in Thailand through CIMB Thai. RHBCap's share price closed at RM9.60 yesterday, up 2 sen from the previous day.
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