Ambitious Three-way Malaysian Banking Union Seen in Jeopardy

Shares in Malaysian lender CIMB Group Holdings Bhd. surged on Tuesday, Jan. 13, on reports that its three-way, $21 billion banking merger will be scrapped after the would-be partners failed to agree on revised terms. The merger of CIMB, RHB Capital Bhd. and Malaysia Building Society has appeared ill-starred ever since it was unveiled in October, with analysts and shareholders immediately expressing concern that the cost of closing branches and laying off workers would outweigh the benefits. RHB had been due to swap each of its shares for 1.38 shares in CIMB in a reverse takeover. The combined CIMB/RHB then planned to buy Malaysia Building Society for cash and shares. But CIMB's falling share price and intervention from Malaysia's stock market regulator have thrown the deal into doubt. Shares in CIMB, which would have controlled 70% of the combined group, had fallen 26% between Oct. 9, when the merger terms were announced, and Monday's close. On Oct. 22, Bursa Securities, the country's stock market regulator, ruled that Employees Provident Fund, which owns stakes in all three banks, should not be allowed to vote its 41.3% stake in RHB Capital as it was not deemed impartial. That ruling handed more power to RHB's minority shareholders, including No. 2 shareholder Aabar Investments PJS, of Abu Dhabi, which opposed the terms of the deal and had pushed for a renegotiation. The planned merger was part of a Malaysian government plan to create regional financial champions and establish Malaysia as a southest Asian financial powerhouse. It would have created a single lender with assets of about M$614 billion ($170.9 billion), making it larger by that measure than Malayan Banking Bhd. The new bank would have ranked No. 4 in the region dubbed the Association of Southeast Asian Nations, or ASEAN. News that the deal would be cancelled was first reported on Tuesday by Malaysian business daily The Edge. The decision to abandon the deal could be announced as soon as this week, according to Bloomberg, which cited unnamed people with knowledge of the situation. None of the three would-be merger partners could be immediately contacted to commented on the deal's progress. Shares in CIMB closed Tuesday at M$5.9, up M$0.74, or 14.3% on their Monday close. That equated to a market capitalization of M$49.86 billion. RHB shares traded at M$7.8, up just under 1%, equating to a market cap of M$20 billion. Malaysian Building Society shares fell to M$2.06, down M$0.13, or 6%, equating to a market capitalization of M$5.5 billion. Read more from:

from Latest TSC Headlines http://ift.tt/1KG1C9r