Aabar offers to sell RHB shares at steep discount to entry cost

This article first appeared in The Edge Financial Daily, on August 15, 2018.
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KUALA LUMPUR: RHB Bank Bhd’s second largest shareholder Aabar Investments PJS is reducing its 17.75% equity stake in the banking group at a significant discount to its entry cost.

The Middle Eastern shareholder, which hired investment banks to run an accelerated bookbuild process yesterday, offered to sell 120,301,300 RHB shares — or about a 3% stake — at a price range of RM5.07 to RM5.18 each.

Based on this, it could raise as much as RM623.2 million from the sale.

CIMB Investment Bank and JPMorgan are joint bookrunners on the deal, according to the term sheet viewed by The Edge Financial Daily.

The offer represents a discount of 3% to 5.06% to RHB’s closing price of RM5.34 yesterday.

What is notable, however, is that it is a huge discount to the RM10.80-a-share that Aabar paid when it acquired a 24.9% stake in RHB from its sister company Abu Dhabi Commercial Bank (ADCB) back in June 2011. The deal at the time, largely seen as a left-to-right-hand transfer, valued RHB at 2.25 times book.

It was a controversial deal as it inevitably set what many industry observers said was an unreasonably high “floor price” that proved to be a stumbling block for parties that attempted mergers with RHB in later years.

Recall that RHB, CIMB Group Holdings Bhd and Malaysia Building Society Bhd called off their proposed merger in early 2015 for a number of reasons, including this, analysts said.

The reason for Aabar’s sudden sale of shares now at a steep discount is unclear. According to a source, it is part of Aabar’s “strategic portfolio management plans”. The buyers of the current block of shares on offer are expected to be local and international institutions.

It remains to be seen if Aabar plans to eventually divest its entire holdings in RHB Bank. It has long been speculated that it would be keen to exit RHB if it managed to get the “right” price for it.

Based on the term sheet, there is a lock-up period of 60 days for all shares held by Aabar, post-placement.

Aabar is a unit of Abu Dhabi sovereign fund Mubadala Investment Co.

RHB’s shares, like other banks, have taken a tumble this year. Its average price this year was RM5.285, while its highest close was RM5.81, which it hit on June 14.

Last year, RHB — in which the Employees Provident Fund owns a 40.67% stake — and AMMB Holdings Bhd aborted discussions for a merger under an all-share deal that would have solidified RHB’s position as Malaysia’s fourth largest lender by assets.