BANK Negara allowed competing bids for banks after the bitter takeover of Southern Bank Bhd by CIMB Bank Bhd in 2006.
This came about after Southern Bank’s major shareholder, Tan Sri Tan Teong Hean, felt that he could have got a better price if the central bank had allowed competing bids.
Subsequently, in 2011, when RHB was a takeover target, both Malayan Banking Bhd and CIMB Group Holdings Bhd put in competing bids for the banking group.
The offer was the same for RHB Capital Bhd, something which did not go down well with the Aabar Group that had a 25% block in the banking group.
The deal was scuttled when a transaction was done between two companies under the Aabar Group, valuing the RHB Cap shares at RM10.80 apiece.
“But the exercise was bad for RHB Cap. It was perceived as a company that was up for sale. It lost good people and customers,” says an official close to the Employees Provident Fund (EPF), which is a major shareholder in both RHB Cap and Malaysia Building Society Bhd (MBSB).
“The outcome was as though the EPF was putting the bank up for sale, which was not the case,” says the official. “There was too much disruption to the business.”
To avoid a similar situation, the boards of RHB Cap and MBSB have agreed to have exclusive negotiations with the CIMB Group for 90 days. The EPF is well-represented on both the boards.
“The EPF is sending the message that the bank is not for sale but open for a merger. If it wanted to sell its stake, it would have undertaken a competing bid,” says the official.
The official also adds that the valuations would be easy to estimate because the banking industry is transparent and well-regulated by Bank Negara.
“Everybody knows everything ... determining the price is not an issue,” says the official.
There have been several reports of Aabar Investments PJSC – which acquired a 22.5% stake at RM10.80 per share in 2011 – disposing its interest. The latest was a report two months ago speculating that a bank in Taiwan was keen on the stake.
“But it would be difficult for another bank to buy the block because it would only be an investment stake and the capital cost would be high with the Basel III requirements,” says the official close to the EPF.
