Property Hunter Magazine August Issue 2014 | Page 58

/// Banking and Investment News

RHB, CIMB, MBSB Seek to Merge
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 RM30 billion, while MBSB’s
total capitalisation would be about
RM6.8 billion.

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
RM90 billion, 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

Sources said the impending merger
was a well-kept secret, with only a
few people having knowledge of it.
“Only a few people were clued in on
the entire deal. News of a merger
between RHB Cap and MBSB was
already out in the market in the
afternoon, but CIMB entering the fray
caught most people by surprise,” 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.

When the market closed and the
announcements came out late, it
became apparent that the creation
of Malaysia’s largest bank was in the
making.
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.

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 RM600 billion and
combined profits based on its last
financial year will exceed RM7 billion.
It will surpass that of Malayan
Banking Bhd (Maybank) that has
a market capitalisation of RM91.1
billion currently and asset size of
RM578 billion as of March 31 this
year.
RHB Cap has been a takeover target
as far back as three years ago, with
both CIMB and Maybank as its
suitors.
The block in RHB Cap that belonged
to Aabar Group from Abu Dhabi was
up for sale then.

MBSB is a building society whose
loans are mainly for residential lo