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The country’s two largest banks, Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd, will face-off against each other in pursuing a merger with smaller rival RHB Capital Bhd (RHBCap).
A merger of either bank with RHBCap would create one of the largest banking groups in Southeast Asia.
The two banks, in separate filings to the stock exchange late yesterday, said Bank Negara Malaysia had “no objection in principle” to them starting preliminary negotiations with RHBCap and its substantial shareholders for a possible merger.
The central bank’s approval for them to start talks is valid for three months, from yesterday.
RHBCap, controlled by the Employees Provident Fund (EPF) with a 45 per cent stake, is the country’s fifth largest banking group by assets.
Its major shareholder, Abu Dhabi Commercial Bank (ADCB), has been looking to sell its 25 per cent stake and had hired two foreign investment banks to run an auction on the stake sale.
Analysts contacted by Business Times said they were somewhat surprised by the latest developments, despite there being much speculation in recent weeks over the two banks’ interest in RHBCap.
On May 19, the day first round bids were due for the ADCB stake, CIMB group chief executive Datuk Seri Nazir Razak openly stated it had no plans to put in a bid, and that the group would instead focus its acquisition efforts in the region.
Maybank, meanwhile, which had gone on an acquisition spree in recent years, was believed to have its hands full with its ongoing RM4.3 billion purchase of regional brokerage Kim Eng Securities.
Still, it had reportedly hired investment bank Nomura to study the possibility of a merger with RHBCap.
“Both banks had been sending out conflicting signals as to their interest in RHBCap,” remarked an analyst from a local bank-backed brokerage.
Still, he pointed, neither bank can afford to pass up the opportunity to at least explore buying a decent bank like RHBCap as there is a lot at stake.
For Maybank, it is an opportunity to seal its position as the largest banking group in the country by asset size.
It would also become the biggest in the region by market value, overtaking Singapore’s DBS Bank.
For CIMB, currently ranked number two in the country and with ambitions to be among the top three banking groups in Asean by 2015, from fifth place now, the purchase would help it overtake Maybank at home in terms of assets.
In the region, it would rank number two in market value, after DBS.
“We believe that it is incumbent on us to engage on this opportunity to put forward a value-creating merger between the two banks and support the national banking consolidation agenda.
“It is, however, very early days as negotiations have not even commenced. Our stakeholders know of our track record in this area and we seek their indulgence over the next few weeks and possibly more, for us to explore possibilities with RHB’s management and shareholders,” Nazir said in a press statement yesterday.
A source familiar with the matter said CIMB is likely to start talks as early as next week, after officially notifying RHBCap of its interest.
The source said the group would not be going specifically for the ADCB stake, and would instead be looking at a “wholistic merger proposal”.
With that, it remains to be seen whether ADCB may want to suspend its process of finding a buyer for its stake.
It is understood that the ADCB board met yesterday.
Reuters reported, citing sources, that Japan’s Sumitomo Mitsui Financial Group and private equity firms Carlyle and JC Flowers were among first-round bidders for the stake.
Maybank, meanwhile, said the potential merger with RHBCap would be consistent with its vision to become a regional financial services leader.
“(It would) support its strategic objectives of being the undisputed number one retail financial services provider in Malaysia and the leading Islamic bank in Asean, amongst others.
“The transaction will be evaluated based on the potential for value creation for Maybank’s shareholders,” it said in a press statement yesterday.
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