EONCap acquisition – no share option
Filed Under (Business News) by Webmaster on 26-04-2010
Tagged Under : eon bank, eon capital, Hong Leong Bank
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HONG Leong Bank Bhd (5819) has submitted its improved RM5.06 billion all-cash bid for EON Capital Bhd (EONCap) to Bank Negara Malaysia and shareholders of both banks are set to vote on it in May.
At the same time, Hong Leong said it plans to raise up to RM1.6 billion from a renounceable rights issue and RM1.8 billion from the sale of capital qualifying securities.
The submission brings the deal, which would create the country’s fourth biggest banking group, a step closer to completion. However, it did not include a share option that was requested by EONCap.
Hong Kong investment firm Primus Pacific Partners Ltd, EONCap’s single biggest shareholder with 20.2 per cent, has been resisting the takeover.
It paid RM9.55 per share for its stake while Hong Leong’s fresh offer is worth RM7.30 a share. On April 18, Primus said it had no plans to sell its shares although it appears that the deal will happen if enough shareholders say yes.
This is because Hong Leong is proposing to buy EONCap’s entire asset and liabilities, a method that requires the nod of just over 50 per cent of EONCap shareholders.
“We target to have our extraordinary general meeting to seek our shareholders’ approval for the transaction by end of May,” Raymond Choong, president of Hong Leong Financial Group Bhd (HLFG), said in a statement.
“The proposed rights issue, on the other hand, is undertaken to strengthen our capital base after the completion of the acquisition of EONCap assets and liabilities” Choong added.
Hong Leong plans to ask HLFG to subscribe to its portion of the rights issue, which will raise RM1.02 billion for the lender.
Hong Leong’s offer comes with several conditions. Chief among them is that it has to be satisfied after going through the books of EONCap.
If the due diligence reveals any adverse effects on EONCap’s financial position or any contingent liability that amounts to at least RM100 million, Hong Leong will offset its bid price against that sum or it could also choose to drop the deal.
