Friday 02 Jun 2023
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(Sept 15): CIMB Group Holdings Bhd., Malaysia’s second-biggest lender, and RHB Capital Bhd. plan to merge in a deal structured as a reverse takeover, people familiar with the matter said.

Under a proposal being discussed, RHB would issue new shares to acquire its larger competitor, said the people, asking not to be named as the details are private. The transaction would value RHB at about 1.4 times book value, they said.

The structure is designed to overcome resistance from Aabar Investments PJSC, RHB’s second-largest shareholder with a 21.2 percent stake, according to the people. The deal would require approval from only a majority of RHB investors, while 75 percent of CIMB shareholders would need to vote in favor, they said.

Spokesmen for CIMB and RHB didn’t immediately return calls and e-mails seeking comment. Aabar officials were not available for comment outside business hours in Abu Dhabi and a spokesman for the investment firm did not immediately return an e-mail seeking comment.

The merger would value CIMB at close to its current share price, one of the people said. RHB’s board is reviewing the proposal and has asked CIMB for more details before making a final decision on whether to back it, the person said.

CIMB, RHB and Malaysia Building Society Bhd. in July announced plans for a three-way merger that would create the country’s largest banking group by assets. The companies, which have a combined market value of about $28 billion, entered into a 90-day exclusive agreement to negotiate and finalize the price and structure of the merger, according to a July 10 joint statement from the lenders.

Topping Maybank

A combination of the three financial institutions would create a group with total assets of 629 billion ringgit ($197 billion) as of June 30, surpassing Malayan Banking Bhd.’s 583.4 billion ringgit, data compiled by Bloomberg show.

Employees Provident Fund, the country’s biggest pension manager, owns a 14.5 percent stake in CIMB and a 41.3 percent interest in RHB, according to data compiled by Bloomberg. The fund owns 65 percent of Malaysia Building Society, the data show. A spokesman for EPF didn’t return a phone call seeking comment.

By structuring the deal as a reverse takeover, CIMB and RHB would put Aabar in a weaker position to scuttle the transaction. An outright acquisition by CIMB would require approval from 75 percent of RHB shareholders.

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