This article first appeared in The Edge Malaysia Weekly on August 28, 2017 - September 3, 2017
THE collapse of merger talks between AMMB Holdings Bhd and RHB Bank Bhd last week raises several pertinent questions for AMMB, a key one being — what now for its two biggest shareholders that want to exit?
Australia and New Zealand Banking Group Ltd (ANZ), the single largest shareholder with a 23.78% stake, and chairman Tan Sri Azman Hashim, with 12.97%, were understood to have been counting on the merger to either divest or pare down their stakes.
Azman, 78, however, tells The Edge he has no plans to pare down his shareholding in AMMB and denies that there is any regulatory pressure to do so ahead of his impending retirement from several roles within the group. (See box story)
“I remain committed to the bank that I have built. Even if the merger had gone through, I would have remained as a substantial shareholder of the merged entity,” he says via email last Friday.
Had the merger, which was to have been an all-share deal, gone through, Kumpulan Wang Persaraan (KWAP) — the country’s second largest pension fund — was expected to have come in to acquire the bulk of ANZ’s diluted stake, seen to be just over 10%, in the merged entity.
Now that the merger is off, so too are KWAP’s talks with ANZ. “Let them (ANZ) settle down and see if they still want to sell. At the moment, there’s nothing on between the two of us,” its CEO Datuk Wan Kamaruzaman Wan Ahmad tells The Edge.
Should ANZ still be keen to sell, he indicates that KWAP would be open to buying a portion of the 23.78% stake, even without a bank merger. “That remains to be seen, but not the entire block because our (investment) model is to buy smaller stakes,” he says, pointing out that any investment of over 10% in the bank would require Bank Negara Malaysia’s approval.
KWAP had reportedly once expressed interest in ANZ’s stake even prior to AMMB’s talks with RHB.
KWAP already holds a 3.05% stake in AMMB and a 3.94% stake in RHB. Its biggest bank holding at the moment is its 5.33% equity interest in CIMB Group Holdings Bhd.
Meanwhile, ANZ is holding its cards close to its chest.
When asked what options it is looking at now and whether it is still sticking to a mid-2018 timeline to sell its stake in AMMB, a Sydney-based spokesperson said: “This is a matter for the individual companies and as a shareholder in AmBank, we will continue to monitor the situation closely. We won’t be commenting on any other speculation.”
ANZ CEO Shayne Elliott had told reporters last November that it would be looking to sell its minority stakes in AMMB and three other Asian banks over the next 12 to 18 months. Private equity firms and some Chinese banks had shown interest in the AMMB stake previously, but nothing came of it.
To be sure, RHB too has shareholders that are keen to exit if offered a good price — namely the Middle East’s Aabar Investments PJS (17.75%) and tycoon Tan Sri Ong Leong Huat (10.13%). The difference, however, is that they are in no hurry and will presumably hold on till the right offer comes along, industry observers say. Aabar’s stake is parked under Mubadala Investments Co.
“ANZ, too, will ideally want to hold out till a good offer comes, but I think, it is increasingly under shareholder pressure to sell because the (Malaysian) bank still seems to suffer from perception issues relating to the 1Malaysia Development Bhd (1MDB)-related scandal from its past,” remarks a senior banker.
Interestingly, Azman has a big say in who takes up the ANZ stake as he has the first right of refusal on it.
ANZ had a carrying value of A$1.2 billion, or about RM4 billion, on the AMMB stake, according to its financial results for the full year ended Sept 30, 2016. This was after it made a massive impairment charge of A$260 million for the local lender in 1HFY2016.
ANZ’s stake had a market value of RM3.2 billion as at last Friday.
For now, however, ANZ and Azman are expected to hold on to their stakes till the next opportunity arises. Analysts believe it may take some time before another merger opportunity arises.
“The only other banks that I think could possibly acquire AMMB are Maybank (Malayan Banking Bhd) and CIMB Group, but I really doubt they would unless there was a push factor, and especially not now, with a general election expected to happen soon. It doesn’t help, of course, that there’s not much clarity about why the merger with RHB failed,” says one analyst from a bank-backed brokerage.
With the merger off, AMMB will now continue with its Top Four strategy, which is to be in the Top Four in four focused areas. Some analysts say while the strategy is sound, it has yet to have a significant impact on earnings.
Group CEO Datuk Sulaiman Mohd Tahir, however, says it takes time to build up the bank, but that it is on track to achieving its targets. “I’m seeing good traction in loan growth, and in areas I want to see growth. You have to remember, it’s not an overnight thing. You can’t switch on and off. It’s about building the bank. And I’m happy to say that we are actually moving in that direction,” he tells The Edge in an interview last week.
AMMB reported a 1.6% rise in net profit to RM328.27 million for the first quarter ended June 30, which came in within analysts’ expectations.
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.