IN recent times, the most expensive of all valuations for banking mergers would be the 2.25 times price to book (P/BV) valuation paid by Abu Dhabi’s Aabar Investment PJSC for a 25% stake in RHB Capital Bhd for RM5.9bil or RM10.80 per share in 2011.
However, the record for the most expensive transaction was made in 1996 when Rashid Hussain Bhd (RHB) founder Tan Sri Abdul Rashid Hussain helmed the merger of DCB Bank Bhd and Kwong Yik Bank – the country’s biggest banking merger at the time at RM2.2bil or a price to book value of 3.2 times.
The merger of Kwong Yik Bank and DCB Bank into RHB Bank aimed to turn RHB Bank into a major force in corporate and retail banking. This merger transformed RHB Bank to become the third largest banking group. Three months later, however, the financial crisis hit Asia.
Banking analysts said that the price to book valuation over the last few years for bank mergers and acquisitions have averaged at about 1.44x.
On the higher end, RHB Capital Bhd paid 1.77 times (x) for OSK Investment Bank in 2012, and Maybank paid 1.9x for Kim Eng Securities a year before that.
Meanwhile K&N Kenanga Holdings Bhd acquired ECM Libra Investment Bank Bhd for RM875.1mil or a P/BV of 1.27 times.
Earlier this year, Affin Holdings Bhd acquired selective assets of Hwang DBS for RM1.36bil. For the portion in Hwang DBS Investment Bank, Affin paid RM1.1bil which was derived based on a price-to-book (PB) multiple of 1.28x on the net assets of Hwang IB as at end-January 2013 of RM849.3mil.
It appears that recent transactions have become cheaper from five years ago, when the P/BV averaged closer to 2 times.
In 2007, DRB-Hicom Bhd acquired 70% of Bank Muamalat Bhd for slightly more than RM1bil, giving it a valuation of 2.1 times price to its net tangible asset.
In 2008, Hong Kong based Primus Pacific Partners Ltd acquired 20% of EON Capital from DRB-Hicom for RM1.3 bil or RM9.55 a share, which works out to about 2.2 times P/BV.
Two years later, EONCap was taken over by Hong Leong Bank Bhd in a RM5.06bil deal after much resistance from its biggest shareholder, Primus Pacific.
It took some 17 months for the deal to close, during which Primus Pacific took the bank and its directors to court to challenge the takeover.
Another notable deal was in 2007 when the Bank of East Asia bought a 25% stake in Affin Holdings Bhd at 1.3 times P/BV for about RM500mil.
The Australian and New Zealand Banking Corp also paid an average 1.7 times price to net tangible asset for its 24.9% stake in AMMB Holdings Bhd.
