KUALA LUMPUR, June 2 — Shares of RHB Bank and AMMB Holdings (AmBank) fell on Friday on concerns that a potential merger between the two lenders in Malaysia’s biggest ever banking deal would create little value for investors.
RHB and AmBank said yesterday they are starting merger talks to form a group worth about US$9 billion (RM38.5 billion). Sources have told Reuters that RHB would be the acquirer in the potential merger, reinforcing its ranking as the fourth largest Malaysian bank by assets.
RHB confirmed in a call with analysts yesterday that it would be the acquirer in the all-stock deal, and indicated it would pay AmBank shareholders a one-time multiple of AmBank’s book value, according to five analysts who participated in the call.
That valuation is not far from AmBank’s current market worth of US$3.7 billion, which analysts say is a 0.9 to 1-time multiple.
“I see this deal as a negative for AmBank shareholders unless they can bargain a cash portion in the deal,” said Hong Leong Investment Bank analyst Khairul Azizi Kairudin, adding he was not optimistic the deal will be completed if it is a share-swap agreement.
The merger would need approval from 50 per cent of RHB shareholders for the deal to go through and 75 per cent of AmBank shareholders, RHB told analysts on the call.
Shares of AmBank fell as much as 1.7 per today, while RHB’s shares slumped as much as 4.3 per cent. The broader Malaysian stock market was up 0.7 per cent.
One AmBank shareholder told Reuters he was unlikely to take up the offer at the valuation RHB was proposing.
“Public-listed companies should come with some premium,” he said, declining to be named citing sensitivity of the matter.
AmBank’s top shareholders are keen to sell their stakes. ANZ Banking Group, which owns a 24 per cent stake, has been weighing a sale of its stake since early last year, sources have said. AmBank Chairman Azman Hashim, the second biggest shareholder with a 13 per cent stake, has expressed his intention to pare the shareholding, according to sources.
Analysts also said today that for the RHB-AmBank merger to bring significant benefits to the combined company, the lender will have to cut costs substantially, a process that could take years.
For the merged bank to realise an increase in return of equity from the current 8.3 per cent to 10 per cent, it will have to shed about 18 per cent of its combined headcount of roughly 25,000 staff and 20 per cent of other operating costs, said UOB Kay Hian analyst Keith Wee Teck Keong. — Reuters
Source: The Malay Mail Online