KUALA LUMPUR: EON Bank Bhd has not always been known by that name. The bank traced its beginnings to Kong Ming Bank Bhd, a very small bank based in Sibu, Sarawak, founded in 1965 by the Ling family.

Kong Ming, whose earlier shareholders included the Ling family and Rin Kin Mei, was for a long time one of the many small niche players, including several banks that catered to communities in Sarawak and Sabah.

In 1990, Kong Ming was ranked as one of the three smallest of 23 domestic banks in terms of assets, together with two other East Malaysia-based banks, Wah Tat Bank and Hock Hua Bank (Sabah). Most of these small banks have since disappeared following the mandatory banking consolidation exercise in 2000.

In 1991, Edaran Otomobil Nasional (EON) acquired 5.15 million shares or 46.85% of the bank for RM94.6 million, marking the birth of EON Bank, which effectively enabled EON to tap into end-financing for Proton vehicles.

EON Bank’s shareholding was already fragmented then, as EON fell short of acquiring all remaining shares it did not own in the bank at RM2.91 per share, after some shareholders holding some 37.86% stake refused EON’s offer.

EON Bank faced its first takeover attempt after the 1997/98 Asian financial crisis in line with Bank Negara Malaysia’s plan then to undertake a major overhaul of the local domestic banking landscape via a mandatory consolidation exercise.

In 1999, the central bank announced that the country’s 55 financial institutions will be merged into six anchor banks to be led by Malayan Banking Bhd (Maybank), Bumiputra-Commerce Bank Bhd, Multi-Purpose Bank Bhd, Perwira Affin Bank Bhd, Public Bank Bhd and Southern Bank Bhd.

EON Bank was to be merged into Maybank.

However, in December 1999, EON Bank, together with RHB Bank Bhd, Hong Leong Bank Bhd and the Arab Malaysian banking group (now known as the Ambank Group) submitted fresh merger proposals to the central bank, following amendments in the guidelines that allowed financial institutions to choose their own partners.

It was said that Rin, then EON deputy chairman, had successfully pushed for EON Bank to have anchor bank status.

In 2000, EON Bank acquired and merged with Oriental Bank, Malaysian International Merchant Bankers Bhd (MIMB), Perkasa Finance and City Finance for a total of RM473 million, paving the way for EON Bank to become one of the 10 anchor banks in the country.

The following year, EON Bank faced yet another takeover threat, this time from Sarawak state-owned Utama Banking Group (UBG), which was still seeking an anchor bank status. But talks between the two banks stalled and UBG was subsequently merged into the RHB banking group in 2002.

Subsequently, EON Bank saw a major restructuring exercise when it undertook a reverse takeover of Kedah Cement Holdings Bhd via a share swap exercise. Kedah Cement sold its cement operations and transferred its listing status to EON Capital Bhd (EONCap) in October 2002. EON Bank became a unit of EONCap.

The restructuring exercise saw EON emerging as the controlling shareholder of EONCap with a 52% stake of the restructured group.

However, shareholding structure issues persisted, as EON was not allowed to own more than a 20% stake in a financial institution under the Banking and Financial Institution’s Act.

EON subsequently pared down its stake in EONCap by distributing the shares to its shareholders and ceased to become the banking group’s substantial shareholder in 2004.

It is said that during this period, Hong Leong Bank Bhd was rumoured to have set its sights on EONCap as well but walked away due to pricing issues without making official attempts.

Meanwhile, EON Bank became a takeover target again — this time by the Ambank Group to create the third-largest banking group in the country. However, talks between the two banking groups fell through, possibly due to issues involving pricing and future management of the merged entity.

In 2004, DRB-Hicom Bhd, which had a stake in EON, emerged as a substantial shareholder in EONCap via a 14.81% direct stake held under its wholly owned unit Hicom Holdings Bhd. By February 2005, DRB-Hicom owned 20.2% block in EONCap.

EONCap saw suitors came courting once again in 2007, when US-based private equity group TPG Newbridge Capital Ltd was reported to be eyeing DRB-Hicom’s 20.2% stake in EONCap. EONCap, in turn, made its first attempt to take over its bigger rival RHB Capital Bhd for RM9.12 billion.

TPG was said to be an added strength to EONCap’s bidding power in RHBCap, should it succeed in acquiring the 20.2% stake in EONCap.

However, talks between TPG and EON failed on speculation that TPG was worried that it could end up holding the largest block of shares in EONCap, but without management control.

EONCap also did not win the bid for RHBCap although its bidding price was said to be the highest among its contenders that included the Employees Provident Fund (EPF), Kuwait Finance House and interestingly, Primus Pacific Partners Ltd.

Primus did not stop at its first known attempt to acquire a Malaysian bank. Within months, talks were rife that Primus had sealed a pact with DRB-Hicom to acquire its 20.2% stake in EONCap.

The deal was announced in February 2008, whereby Primus agreed to pay RM9.55 per share for the 20.2% block, translating into a total of RM1.34 billion or 2.16 times book value. With the 20.2% block, Primus emerged as EONCap’s single largest shareholder in the banking group.

EON Bank has seen many takeover attempts in its history. Hong Leong Bank’s attempt, if it succeeds, could very well be the final one for the banking group.

This article appeared in The Edge Financial Daily, June 15, 2010.