THE proposed mega-merger of CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) — with combined assets of RM613.72 billion (as at March 31) — would make the merged entity the largest banking group by assets and one of the top five in Asean.

Corporate Malaysia started buzzing with news about the merger as early as July and in October, it was revealed that the proposed deal would see RHB Capital acquire the assets and liabilities of CIMB, contrary to popular belief that the bigger bank would be the acquiring party.

The deal will be done via a share swap of one RHB Cap share for 1.38 CIMB shares. This is based on a benchmark price of RM7.27 per CIMB share and RM10.03 per RHB Cap share, which translates into a price-to-book value (P/BV) ratio of 1.7 times and 1.44 times for CIMB and RHB Cap respectively.

Also, CIMB’s Islamic banking subsidiary will acquire all the assets and liabilities of MBSB for RM7.77 billion or RM2.82 per share at a P/BV of 1.32 times. MBSB’s shareholders will have a choice of cash or new shares in the unlisted CIMB Islamic group.

The Edge Financial Daily had reported in August that the merger route being considered would see CIMB selling its entire banking business to RHB Cap in return for new shares.

As the buyer of the assets and liabilities of another banking group, RHB Cap only needs a 50%+1  share approval for the deal compared with the selling party that would need 75%.

With such a structure, the merger looks like a done deal as one of its drivers — the Employees Provident Fund (EPF) — already holds a 41.5% stake in RHB Cap.

Therein lies the debate — can and should the EPF vote on the deal?

Apart from its 41.5% stake in RHB Cap, the EPF also owns 14.6% of CIMB and 64.6% of MBSB. Thus, there is likely to be a conflict of interest if the retirement fund is allowed to vote.

On Oct 22,  Bursa Malaysia — which decides whether or not majority shareholders can vote on a deal — barred the EPF from voting on the merger. The latter’s appeal against the decision was rejected on Dec 10.  

Should the EPF sit out the vote, RHB Cap’s Middle-Eastern investor, Aabar Investments PJS, holds the trump card. Given its 21.2% stake in RHB Cap, it could stymie the deal. And with 9.9% equity interest in RHB Cap, OSK Holdings Bhd’s vote is also important.

While the mega-merger is nowhere near completion, much has happened since it was announced in July. We review here its key players. - by Joyce Goh

Datuk Seri Nazir Razak
Chairman, CIMB Group Holdings Bhd

Nazir, who is synonymous with CIMB, stepped down as its CEO in September. He handed over the reins to Tengku Datuk Zafrul Tengku Abdul Aziz and took over from Tan Sri Md Nor Md Yusof as chairman of the company.

His “retirement” comes at a crucial time for the group, which is in the middle of a mega-merger. However, Nazir is still very much involved in the deal. In fact, industry players say he is one of its engineers.

“They say third time is lucky. I’m quite optimistic that we can pull together a successful merger proposal to be taken to all the shareholders for their consideration,” he said in September.

To recap, a merger and acquisition between CIMB and RHB Cap was initiated in 1998 and 2011, but both attempts failed.

Nazir also commented on the proposed mega-merger this month, signalling his confidence that it is more or less a done deal.

“We think we will get through it with or without the EPF,” he told reporters on Dec 2.

Datuk Abdul Farid Alias
Group president and CEO, Malayan Banking Bhd

Maybank will lose its position as the country’s largest bank once the three-way merger between CIMB, RHB Cap and MBSB is completed. But Farid has put on a brave face.

“We do not need to acquire another bank just to be the biggest. [With] the size we have now, we can be significant and relevant to provide all that we promised our customers,” he said in August.

When news of the mega-merger broke, there was intense speculation that Maybank would join the fray and make a bid for RHB Cap. After all, the largest bank in the country had competed head-to-head with CIMB for RHB Cap in 2011. However, both banks decided to walk away from RHB Cap at the time because Aabar Investments PJS acquired the stake from Abu Dhabi Commercial Bank (ADCB)  at RM10.80 per share or 2.25 times book value.

On Aug 2, 2013, Farid replaced Datuk Seri Abdul Wahid Omar, who had resigned in June to take over as Minister in the Prime Minister’s Department in charge of the Economic Planning Unit.

Prior to that, the Harvard Business School alumni was deputy president and head of Maybank’s global wholesale banking.

Farid has over two decades of banking and finance experience and also worked at JP Morgan and Schroders and was a director of investments at Khazanah Nasional Bhd.

Tan Sri Ong Leong Huat
CEO and group managing director, OSK Holdings Bhd

The 69-year-old self-made tycoon has been in the world of finance for over four decades now and has been involved in countless corporate deals.

While he initiates and executes deals for his clients, Ong’s businesses have had their fair share of corporate exercises too. This year, the veteran banker made the headlines for two mega-mergers — one involving his interest in RHB Cap and the other involving his property companies.

Just two years after Ong sold his investment banking arm to RHB Cap for RM2.09 billion (he was paid via a combination of cash and shares in the latter), he is back in the spotlight, thanks to the proposed merger between CIMB, RHB Cap and MBSB.

With Ong controlling OSK’s 9.9% stake in RHB Cap, he has a say in the mega-merger. Following Bursa Malaysia’s decision to disallow the EPF from voting on the merger, OSK is the second-largest shareholder in RHB Cap, after Aabar, that will be voting on the merger. OSK has yet to reveal its cards but its founder Ong will be able to sniff out a lousy deal in a flash.   

While the banking and investment fraternity awaits the outcome of the mega-merger, Ong is involved in a three-way merger between  OSK, OSK Property Holdings Bhd and PJ Development Holdings Bhd (PJD), which will create a first-tier property group.

Jho Low
CEO, Jynwel Capital

Penangite Low Taek Jho, better known as Jho Low, is still drawing attention despite spending less time in the country. This is because the 32-year-old continues to be involved in the local corporate world partly due to his strong Middle-Eastern connections.

One of the more notable corporate deals which Low was instrumental in facilitating was the entry of ADCB into RHB Capital Bhd in 2008. At the time, ADCB had paid RM7.20 per share for a 24.9% stake in RHB Cap at a valuation of 2.2 times price to book. The stake was then sold to its sister company Aabar Investments for RM10.20 per share in 2012.

With its current 21.2% interest in RHB Cap, Aabar has a say in the CIMB-RHB Cap-MBSB mega-merger. While Low may not be directly involved in the deal, industry observers say he is very much behind the scenes, safeguarding the interests of his Middle-Eastern friends.

The Wharton alumni also made the headlines this year, thanks to his family investment vehicle Jynwel Capital. Since 2012, Jynwel has advised on investments of up to US$7 billion, say reports.

This year alone, Jynwel, together with Abu Dhabi government-linked funds, made an offer to Adidas AG to buy the fitness brand Reebok for €1.7 billion, says The Wall Street Journal. Jynwel also made an offer to acquire London-listed Salamander Energy Plc in October but recently decided not to pursue it .

In 2009, Low was involved in the setting-up of the Terengganu Investment Authority, in which he served as an adviser. He left in mid-May 2009 and the prime minister rebranded the vehicle as 1Malaysia Development Bhd in September 2009 and expanded its operations to federal level.

Datuk Shahril Ridza Ridzuan
CEO, Employees Provident Fund

The EPF’s head honcho does not give up easily. After Bursa Malaysia barred the retirement fund from voting on the proposed merger between CIMB, RHB Cap and MBSB on Oct 22, it made a submission to the stock exchange’s appeals committee on Oct 31. It wants a chance to plead its case via an oral presentation.  

Shahril has publicly shared his belief that the EPF, as the major shareholder of both RHB Cap and CIMB, has the right to vote on the merger of the two banking groups.

In making the EPF’s case, he said the retirement fund had the interest of 14 million members to protect and that it only wanted to vote on the merger between RHB Cap and CIMB. It will sit out the exercise involving MBSB.

The EPF owns 14.6% of CIMB, 41.5% of RHB Cap and 64.6% of MBSB.

The 44-year-old Shahril took over as CEO of the EPF from Tan Sri Azlan Zainol in 2013. Before that, he was the EPF’s deputy CEO for investment. Prior to joining the retirement fund in 2009, Shahril was managing director of Malaysian Resources Corp Bhd.

Sheikh Mansour Zayed Al Nahyan
Deputy prime minister of UAE and minister of presidential affairs of Abu Dhabi

It is well known that the Middle-Eastern investor in RHB Cap — Aabar Investments PJS — wants a higher price for its stake than its entry cost of RM10.80 per share.

While Aabar has yet to make an official statement on this, Abu Dhabi has formally reached out to the Malaysian government, expressing concern about the EPF’s right to vote on the proposed mega-merger.

The Edge Financial Daily reported that Sheikh Mansour had sent Prime Minister Datuk Seri Najib Razak a letter on the matter.

Aabar — Abu Dhabi’s strategic investment arm — owns a 21.2% stake in RHB Cap.

While Aabar’s entry cost was RM10.80, it is known that its total cost of investment in RHB Cap is above the RM11 per share price range. The total cost takes into account the interest expense to fund its investment as well as dividends received.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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