KUALA LUMPUR (May 21): CIMB Securities is doubtful about a possible merger between Affin Bank Bhd (KL:AFFIN) and AMMB Holdings Bhd (KL:AMBANK), presenting two possible scenarios, but not supporting either. Both scenarios would require issuing a large number of new shares, potentially diluting stakes of current shareholders.
CIMB Securities said AMMB’s share price fell after the merger news, likely due to uncertainty about the bank’s strategic direction. It is not optimistic about the merger in either scenario.
The note was prompted by a report that the Sarawak government, which holds a 31.3% stake in Affin, may want to buy a stake in another bank to merge with Affin. The Sarawak government is said to have approached Tan Sri Azman Hashim, who holds an 11.8% stake in AMMB through Amcorp Group Bhd, but talks have not advanced.
In the first scenario, CIMB Securities said Affin Bank would need to issue 7.72 billion new shares to fully acquire AMMB, which would reduce the Sarawak government’s stake and make Amcorp Group the largest shareholder.
In the second scenario, if AMMB acquires Affin, it would increase AMMB's shares by 63.8%, causing its target price to drop. The Sarawak government’s stake would fall, making it the largest shareholder. If AMMB buys Affin at a low price, its target price could rise, but CIMB Securities noted that this price may not appeal to Affin's minority shareholders.
AMMB owns AmBank, the sixth largest banking group in Malaysia. Its share price was down 0.56% to RM5.33 a share at Wednesday's midday break, giving it a market capitalisation of RM17.6 billion. Year to date, the stock is down 2.74%.
Affin Bank last traded at RM2.71, giving the bank a market capitalisation of RM6.87 billion.