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The board of EON Capital Bhd (EON Cap), the holding company of EON Bank Bhd, has submitted an application to Bank Negara yesterday for permission to start merger and acquisition (M&A) talks with Hong Leong Bank Bhd (HLB).

However, EON Cap is not restricting itself to just negotiation with HLB.

EON Cap told Bursa Malaysia yesterday that it would seek approval for itself and/or any one or more of its subsidiaries to commence negotiations with potential third parties and their related corporations in Malaysia to explore the options.

EON Cap would be exploring several options including the sale of assets and liabilities, acquisition of 5% stake or even merger with a local financial institution.

The first option is for EON Capital directly and/or through any one or more of its subsidiaries undertaking a sale of EON Cap’s assets and liabilities, including (but not limited to) the equity interests in, and/or the assets and liabilities of, EON Bank, EONCap Islamic Bank Bhd and/or MIMB Investment Bank Bhd.

The other option is to acquire at least 5% of the interest in shares in, (ii) merging with, or (iii) undertaking an acquisition of the assets and liabilities of, a licensed financial entity.

EON Bank Group chief executive officer Michael Lor said: “A responsible board or shareholder of any organisation will always seek approval. This is part of the Bafia (Banking and Financial Institutions Act 1989) requirement. However, seeking approval to talk does not mean anything.

“The bank can seek approval to talk to many people. As a responsible board to majority and minority shareholders, the board will seek the necessary approval when it is timely to do so,” he said at the launch of the bank’s deposit campaign “Savers Go Places” yesterday.

This followed a board meeting last Thursday to discuss the invitation from HLB, which had earlier obtained the green light from Bank Negara to talk on an institutional basis.

This confirmed a StarBiz report yesterday which said the EON Cap board would send a letter to the central bank to start M&A talks with HLB.

Meanwhile, Lor said EON Bank aimed to garner RM300mil worth of deposits this year from its new deposit campaign.

He said the bank was targeting a total deposit growth of 20% or about RM6bil this year from a series of deposit campaigns and initiatives.

As at the end of last year, EON Bank had a total deposit balance of close to RM32bil. “We are looking at 14% loans growth for the EON Bank group this year. Last year, we had a loans growth target of 6% to 8% and we are on target (to achieve it),” Lor said.

He said loans growth this year would be driven by its core businesses – retail banking and the small and medium enterprise business.

Related Posts:

• Hong Leong extends EONCap offer to November 2010
• Hong Leong revised terms to buy EON Cap
• EONCap board approved submission offer to shareholders
• EGM for EON Cap
• EON Cap rejects Hong Leong’s offer

Its front page in all major newspaper in Malaysia today, 5 February 2008. The purchase of Primus Pacific Partners Ltd (a Hong Kong based investment fund) of 20.2% shareholdings of EON Capital Bhd from DRB-HICOM. Primus major shareholders are the Qatar Investment Authority and the Tsai family that control Taiwan based Fubon Financial company.

Pro Trade Shares decided to break its own promise of not making any comments about listed shares in Bursa. I have decided to comment on the matter of Primus Pacific Partners buying a majoring stake in EON Capital Berhad which own EON Bank. Will this be the first of many to come? I don’t know. Maybe I will, maybe I won’t. Why don’t you guys out there post your comments on this.

The inside information that I received was that since mid 2007, Primus appointed auditors/consultants have been doing its due diligent in EON Bank since they applied to Bank Negara to negotiate on the purchase of a major stake from DRB-HICOM. All budget proposal for 2008 submitted to EON Bank board of directors were scrutinised. All the expenditure proposal has to be approved by the appointed consultants before the bank board can discuss them. This is to ensure Primus’s interest is protected prior to the official signing of the purchase agreement.

A few senior management staff have either ‘retired’ or ‘re-assigned’ in a new organisation structure announced at the end of 2007. Two senior position has been created; Head of Group Finance and Head of Group Operations and IT. The positions are still vacant.

There is a very strong possibilities that these two senior positions will be given to Primus appointed people. The Head of Group Finance is a very important position in the bank. It allow the person to authorise all expenditures or spending or investment by the bank. Therefore the bank board or senior management committee cannot authorise any ‘big’ expenditure spending without the knowledge of Primus (if the person is appointed by Primus).

The last traded price for EON Capital Bhd this morning (5 February 2008) is RM6.40, up 32sen. Still far from the price of RM9.55 per share as paid by Primus to DRB-HICOM.

According to reliable sources, Bank Negara will not allow Primus to increase its stake in EON Capital Bhd as Primus is not a foreign financial institutions such as a bank, unlike the ANZ bank from New Zealand that took a much bigger share in Arab Malaysian Bank last year. Since Primus will not be making anymore offer to existing shareholders of EON Capital Bhd, my guess is that the share price will not move upward to the RM9.55 region. Its share price will continue to be in the region of RM6.00 to RM7.00 unless there are any major announcement on its profitability or its business direction.

There, this is my comments on the purchase of major block from DRB-HICOM by Primus Pacific Partners Ltd. and the very high possibility of Primus placing their people in the senior management position in EON Bank.

To my Chinese readers, I wish you all a very Happy and Properous Chinese New Year, the year of the RAT.

Related Posts:

• EON Capital said Yes to Hong Leong takeover
• Primus petition failed
• EONCap Shareholders say Yes for sale of EON Bank
• EONCap sequel: EGM on 19 August
• Hong Leong extends EONCap offer to November 2010