‘Talks making headway’

THE merger talks between CIMB Group Holdings Bhd, RHB Capital Bhd (RHBCap) and Malaysia Building Society Bhd (MBSB) are progressing

well, with an announcement expected by the end of the month, say sources.

The three parties, which share a common shareholder — the Employees Provident Fund (EPF) — are at the end of the first month of their 90-day exclusive negotiations.

On July 10, the three financial institutions announced that they have received Bank Negara Malaysia’s approval to commence discussions to merge the businesses of both RHB and CIMB as well as create an enlarged Islamic banking franchise with MBSB.

The exclusivity agreement allows them to finalise pricing, structure and other terms and conditions without competing bids from other parties.

Analysts expect CIMB to take the lead and undertake a share swap to acquire RHBCap and MBSB.

The deal, according to TA Securities Holdings Bhd, would most likely be funded by the issuance of new CIMB shares in order to prevent massive capital expenditure.

It is also believed that the exercise would involve, firstly, a merger between CIMB and RHBCap. This will be followed by merging CIMB-RHBCap’s combined Islamic banking businesses with MBSB to create a mega Islamic bank.

The merger is expected to c reate a banking group with total assets of more than RM613 billion and a market capitalisation of more than RM88 billion.

Maybank, currently the largest banking group by assets, has an asset size of RM578 billion and market capitalisation of RM91.1 billion as of March 31.

CIMB Group is Malaysia’s second-largest bank by assets while RHBCap is the country’s fourth-largest financial services group.

Property financing firm MBSB last year was reportedly in the process of transforming into a full-fledged bank.

  MBSB’s operations, when combined with RHB Islamic Bank and CIMB Islamic Bank, could produce a mega Islamic bank with total assets of RM122 billion, rivalling that of Maybank Islamic’s RM127 billion.

EPF owns 14.46 per cent stake in CIMB, 40.76 per cent in RHB and 64.73 per cent in MBSB.

Government investment arm Khazanah Nasional Bhd is CIMB’s major shareholder with about 30 per cent interest.

Meanwhile, when asked about the progress of the merger talks, MBSB president and chief executive officer Datuk Ahmad Zaini Othman said: “We have been in active discussion for almost a month now. This is a good development.”

He was speaking after MBSB presented a RM100,000 donation to Viva Palestine for the purchase of an ambulance and medical aid.

On whether the proposed merger could result in a reduction of bank branches, Zaini said: “We have legal and corporate advisers poring over the numbers to identify the synergies we can reap and the overlaps we need to address.”

On whether there would be a voluntary separation scheme for bank employees in the near future, he said: “It is difficult to say at this point in time because we have not assessed the right size of a possible merged entity.”

Asked if he would be keeping his job after the merger, Zaini replied enigmatically: “This merger discussion goes beyond individual concerns.

“What is important is to focus on value creation and the interests of MBSB.”