Trade Shares or Stocks in Bursa Malaysia|How to start Trading | Trade Stocks in Bursa Malaysia | How to Open Trading Account | How to Open CDS Account | What is Collateralised Trading | Discretionary Financing | Share Margin Financing | CDS Share Transfer | Securities Borrowing and Lending (SBL) | Regulated Short Selling (RSS) | Brokerage | Internet Trading Brokerage Discount | Cash Upfront Brokerage Discount | Clearing Fees | Contract Stamp Duties | Bursa Malaysia | Composite Index | Bursa News | Listed Companies News | Market News | Market Outlook

EON Capital Bhd (EONCap) will be delisted from the Main Market of Bursa Malaysia by early October 2011, director Nicholas Lough said.

The delisting follows the disposal of EONCap’s entire assets and liabilities to Hong Leong Bank Bhd (HLBB).

“Our businesses will be concluded by end of the year and we expect (EONCap) to be delisted by end of the third quarter or early fourth quarter,” he told reporters after its annual general meeting yesterday.

HLBB took over EONCap in a RM5.06 billion deal, paving the way for the former to become the fourth largest banking group in the country.

As part of the deal, EONCap will pay a special tax-exempt dividend of RM5.16 per share today to shareholders, totalling RM312 million.

EONCap chairman Goon Hoe Soon said the interim dividend was a bonus to its shareholders and “it was heartening for us to complete the HLBB offer and acquisition on a high note by delivering improved value to all shareholders”.

As for the balance cash proceeds of RM1.79 billion from the disposal to HLBB, Gooi said this will be distributed back to entitled shareholders via a non-taxable capital repayment which is now pending a High Court confirmation on July 18.

He said the capital repayment was approved by shareholders at last year’s extraordinary general meeting and is expected to be completed by the end of this year.

Gooi said with the completion of the takeover, the EONCap board wants to return the proceeds to shareholders in an expedient manner.

He said Primus (M) Sdn Bhd’s objection to the takeover could not prevent EONCap from proceeding with the payment of dividend because Primus’ appeal had no interim order for a stay.

On April 28 2011, the petition by Primus opposing the takeover of EONCap’s assets and liabilities was dismissed by the High Court with costs.

Primus yesterday lost its appeal to set aside that court decision. It also failed in its appeal to reverse a High Court ruling that validated a shareholders’ meeting held on September 27.

The Court of Appeal ordered Primus to pay costs to the respondents involved in the court case, to the tune of RM1.05 million in total.

Gooi said due to the merger, the next few months will see system integration and transformation of EON Bank branches nationwide. It will also see the assimilation of over 5,800 EONCap staff into HLBB.

Meanwhile, EONCap announced that a major shareholder, Rin Kei Mei, will no longer be a director after he did not seek re-election at the AGM.

Related Posts:

• EON Capital said Yes to Hong Leong takeover
• EONCap Shareholders say Yes for sale of EON Bank
• EONCap sales cleared by Ministry of Finance
• EONCap sequel: EGM on 19 August
• EONCap Saga continues : Proceed with EGM

EON Capital Bhd (EONCap) has accepted a RM5.06 billion takeover offer from its larger rival Hong Leong Bank Bhd, a move that will create the country’s fourth largest banking group by assets.

It did this on Thursday, after the High Court dismissed a lawsuit taken by EONCap’s largest shareholder, Hong Kong-based Primus Pacific Partners, to prevent the takeover.

“The board of directors … signed and delivered their acceptance of the offer,” EONCap told Bursa Malaysia yesterday.

It also said Hong Leong had agreed to its last-minute request to let EON Bank Bhd, its wholly-owned banking unit, pay out a net interim dividend amounting to RM311.9 million.

The dividend, which works out to 45 sen a share, will not be deducted from Hong Leong’s offer price of RM7.30 a share for EONCap’s assets and liabilities. It will also not form part of the assets to be taken up by Hong Leong.

While EONCap has not explicitly said what it intends to do with the dividend it receives from EON Bank, analysts expect it to eventually pay it out to all its shareholders.

This would indirectly raise the offer price for EONCap to RM7.75 a share.

“The additional 45 sen a share sweetens the deal somewhat for shareholders, especially minorities, after waiting so long for it to be concluded,” said Lim Sue Lin, a banking analyst at HwangDBS Vickers Research.

EONCap chairman Gooi Hoe Soon said the dividend was secured after much negotiation with Hong Leong. “We’re pleased with the result,” he said, adding that the directors intended to manage the transaction in a “fair and equitable” manner to all parties concerned.

The proposed dividend is still subject to Bank Negara Malaysia’s (BNM) approval. EONCap will also be making an application to the Securities Commission (SC) for a proposed change in control of its investment bank, MIMB Investment Bank Bhd.

“The parties shall complete the transaction” once the BNM and SC approvals have been obtained, EONCap said.

It remains to be seen whether Primus, a private equity firm, will make any further moves to block the deal. Its lawyers have said they intend to file an appeal against the court’s decision.

“It is only after the court rules on the appeal can the deal come to completion. The interim dividend is positive as it is not excessive and yet is sufficient to increase the probability of bringing the merger to a close,” OSK Research said in a note to clients yesterday.

Primus, who objected to the deal on grounds that the RM7.30 a share offer was too low and not in the company’s best interest, stands to make a loss on its investment if it goes through. The offer is 31 per cent lower than the RM9.55 a share it paid for its 20.2 per cent stake in 2008.

Analysts nevertheless expect the deal to go through. “With the approval from the board, we now expect the takeover to proceed,” said one from AmResearch Sdn Bhd.

The takeover has turned out to be a long-drawn affair, at over a year, the longest ever in the Malaysian banking sector. Hong Leong first showed formal interest in EONCap in December 2009. It made its current offer in April last year, improving on an earlier RM4.9 billion deal.

Shares of Hong Leong and EONCap were suspended from trading in the stock market yesterday to allow for them to make their announcements on the deal. They were last traded at RM10.40 and RM7.23, respectively.

OSK said it expects EONCap’s share price to trade upwards to just under RM7.75 to reflect the dividend. HwangDBS’ Lim said shareholders should use the takeover proceeds to re-invest in Hong Leong to ride on the upside of the enlarged entity, which will now have assets of over RM140 billion. She has a “buy” call on Hong Leong’s stock, with a target price of RM11.80.

Related Posts:

• Nearing the end for EON Capital Berhad
• EONCap Shareholders say Yes for sale of EON Bank
• EONCap sales cleared by Ministry of Finance
• EONCap sequel: EGM on 19 August
• Hong Leong extends EONCap offer to November 2010

Bank Negara is believed not likely to approve the entry of a private equity firm into RHB Capital Bhd, the fourth largest banking group, following the troubled history of Hong-Kong based Primus Pacific Partners at EON Bank.

“There is no synergy between private equity and banks,” said a source.

Reuters reported last week that the Carlyle group and TPG Capital were making a joint-bid for a US$1.5bil stake in RHB Capital.

Primus is currently embroiled in a court battle in which Ng Wing Fai of Primus, which owns 20.2% of EON Capital Bhd, is challenging the other directors on their decision to table the takeover bid (which Primus considers undervalued) from Hong Leong Bank to shareholders.

The court judgement will be made known by the end of this month.

EON Capital has been rocked by a series of disgreements among shareholders with Ng and Rin Kei Mei ending on opposing sides and issues with Bank Negara such as non-subscription of bonds by Primus.

Abu Dhabi Commercial Bank (ADCB), the 25% investor in RHB Capital, has engaged Goldman Sachs and Bank of America-Merrill Lynch to run the action for the sale of its stake.

TPG has an Indonesian arm, TP Nusantara which currently owns 59.7% of Bank Tabungan Pensiun Nasional; TPG plays an active role in the management of the bank which has done well since the purchase in 2008, said HwangDBS Vickers Research senior analyst Lim Sue Lin.

“If that is true, TPG may like RHB for its value and sustainable business model,” she said, noting that over the last three to four years, the banking group had been able to grow on its own with a proven business model.

Analysts will not discount the possibility that CIMB may be interested in the stake in RHB although they see duplication within the two banking groups.

“Any consolidation will be more for size,” said a senior analyst, adding that a merger between CIMB and RHB would create the fourth largest bank in Asean by assets.

However, analysts caution that there could be another round of voluntary separation scheme (VSS) should CIMB merge with RHB.

CIMB has voiced its ambition of being among the top three banks in South-East Asia by market capitalisation, positions currently held by Singapore banks DBS, OCBC and UOB.

“If it happens, the benefits are likely at the consumer banking level,” said another senior analyst, adding that RHB has higher retail deposits and CIMB will be able to leverage on the “Easy” banking concept based on lower costs, speed of approval and convenience.

RHB has hired 500 new staff for its 150 Easy outlets, targeted to reach 270 by year-end.

Some analysts recall that Maybank was said to be keen on RHB a few years back but are unsure of its interest now,

However, one analyst opined that Maybank might need more time to digest its expensive acquisition of Bank Internasional Indonesia which has yet to contribute strongly to group results.

Analysts are keenly watching for developments in the reported interests of DBS owned by Singapore’s Temasek which, in turn, holds 14.8% of Alliance Financial Group (AFG) and Australia and New Zealand Banking Group (ANZ) which owns 24% of AMMB.

So far, foreign banks like ADCB and Bank of East Asia are holding 25% each in RHB Capital and Affin respectively while ANZ’s investment is up to 25% in AMMB.

While the limit on foreign shareholding in local banking groups is 30%, there has yet to be a precedent, an analyst observed.

“If ANZ were to acquire a stake in RHB, it would need to merge AMMB with RHB,” said Lim in a research note last Friday.

Noting that ANZ has expressed its interest to take a larger stake in AMMB, “even though the threshold for foreign shareholding remains capped at 30%, total returns as a shareholder would be larger for ANZ in an enlarged AMMB-RHB Capital scenario,” said Lim.

Should DBS buy the RHB stake, it is unclear if AFG will be merged with RHB or Temasek will sell off its stake in AFG, as investors can only hold one banking licence.

Hwang DBS said in its regional industry focus that Malaysian banks were currently preferred over those in Thailand and Indonesia, with excitement driven by mergers and acquisitions.

“The target banks will benefit from input the potential stakeholders could bring to the table to improve standalone value propositions,” said Lim in the report dated April 14.

According to Hwang DBS, the AMMB-ANZ alliance has proven to be the most successful foreign strategic shareholding tie-up to date.

It noted that the new management had implemented new risk management and risk scoring systems; made AMMB more flexible to adjust to interest rate hikes; improved its deposit franchise (particularly low cost deposits) and created additional sources of revenue flows from treasury and derivatives.

“These initiatives led AMMB’s net profit to grow from RM670mil in financial year (FY) 2008 (when ANZ became shareholder) to RM1.1bil in FY10,” the report said.

Related Posts:

• Nearing the end for EON Capital Berhad
• Maybank & CIMB going for RHB
• Bank Negara new guidelines on oversea investment
• TPG Capital not bidding for RHB Cap
• Bank Negara raises interest Rate by 25 basis point