RHB Capital, OSK Deal To Create Malaysia's Largest Brokerage

28 May 2012 1

-- RHB Capital to buy OSK Holding's investment banking business in MYR1.95 Bln cash-and-shares deal -- Merged entity to be the largest brokerage in Malaysia with 15% market share -- Aims to earn at least 10% of its revenue from overseas (Adds deal details and background throughout) KUALA LUMPUR -The consolidation among Southeast Asian banks forced by competition and cheaper lending that squeezes profit margins was brought into sharp relief Monday when Malaysian lender RHB Capital Bhd. (1066.KU) said it will buy OSK Holdings Bhd.'s (5053.KU) investment banking arm for MYR1.95 billion ($620.2 million) in cash and shares. The deal will create the country's largest stock brokerage and investment bank by assets. It will have approximately 15% of Malaysia's brokerage business. The consolidation will help lower costs and create a company employing almost 4,000 people--none of whom will lose their jobs, RHB Capital and OSK said Monday. It will expand across Singapore, Vietnam, Thailand, Indonesia, Hong Kong, China and Cambodia with the intention of generating at least 10% of its annual revenue from overseas, Kellee Kam, group managing director of RHB Capital said at a news conference. He expects positive earnings per share after 18 months. RHB Capital said Monday it will pay MYR1.95 billion ($620.2 million)--MYR147.5 million in cash and 245 million new shares at MYR7.36 each--for OSK Investment. Separately, RHB Capital said it will pay MYR39.30 million cash for 20% of OSK Trustees Bhd., all of OSK Investment (Labuan) Ltd. and 59.95% of Finexasia.com Sdn. Bhd. This deal, which is expected to be completed in the October-December period, continues the recent consolidation of Southeast Asian banks. Top lender Malayan Banking Bhd. has been looking to expand in to Laos, Vietnam, Cambodia, Indonesia and Thailand after it acquired Kim Eng Group last year for $1.4 billion. Rival CIMB Group Holdings bought 60% of Bank of Commerce of the Philippines for MYR881 million and Royal Bank of Scotland Group PLC's (RBS.LN) cash equities and associated investment banking businesses in the region. Ebbing risk appetite from overseas investors because of the euro-zone debt crisis has also hurt the appeal of emerging-market shares. Credit Suisse advised RHB and Goldman Sachs was the investment banker to OSK.