MEGA BANK PLAN: EPF losing right to vote will not derail deal, says analyst
THE Employees Provident Fund’s (EPF) exclusion from voting in Malaysia’s biggest merger exercise will not derail the deal much, given its flexible valuation and pricing, said an analyst.
“It is a share swap deal, so in a way, valuation and pricing are more flexible. When you pay a share with another share, it is simply a matter of what premium you ascribe to each,” the analyst said.
Bursa Malaysia on Tuesday rejected EPF’s appeal to vote in the merger of CIMB Group Holdings Bhd, RHB Capital Bhd (RHBCap) and Malaysia Building Society Bhd (MBSB) to form a mega bank.
The decision is said to have given minority investors more clout and threw doubt on the deal’s prospects.
In explaining the rejection, Bursa Malaysia said: “There are no adequate justifications that the potential conflict of interests involving EPF has been eliminated or sufficiently mitigated.”
EPF owns about 14.6 per cent of CIMB, 41.5 per cent of RHBCap and 64.6 per cent of MBSB.
If successful, the merger would create Malaysia’s biggest bank, reportedly with a market value of US$22 billion (RM71.7 billion).
With the state pension fund’s exclusion from the voting pool, the deal and price are now effectively in the hands of Abu Dhabi’s strategic investment company Aabar Investments, which owns a 21.2 per cent stake in RHBCap.
“Aabar holds the majority stake in the reduced voting pool of non-interested parties, which now excludes the EPF. It can make or break the deal. However, even if Aabar manages to haggle and push for a higher price, the EPF would also end up a winner as the price would apply to all shareholders in RHBCap,” said the analyst.
The refusal to grant the waiver was plus for corporate governance in Malaysia, but CIMB may now have to scramble to appease Aabar and other minority shareholders, according to Reuters.
It quoted a senior analyst at Sanford C. Bernstein as saying that although chances of the deal being dropped had increased, he did not see it as the most likely scenario as CIMB had few options to grow and Maybank was likely waiting in the wings to woo RHBCap.
Trading in CIMB, RHBCap and MBSB shares were suspended on Tuesday pending the announcement but will resume today.