KUALA LUMPUR: Bursa Malaysia’s Appeals Committee will meet tomorrow to deliberate on the Employees Provident Fund’s (EPF) appeal to vote in the proposed merger of CIMB Group Holdings Bhd, RHB Capital Bhd (RHBCap) and Malaysia Building Society Bhd (MBSB).
Sources said the EPF wants a chance to make an oral presentation at the meeting in a bid to present its case more effectively. As at press time, it was not yet known whether Bursa will allow it to do so.
It is understood that only four of Bursa’s eight-member Appeals Committee will deliberate on the case as the other four are deemed to be potentially “conflicted”, being in the legal or banking industries.
As such, Bursa chairman Tun Mohamed Dzaiddin Abdullah, who normally chairs the Appeals Committee, will not be involved in tomorrow’s deliberation. The meeting will instead be chaired by committee member Datuk Mohammed Adnan Shuaib, sources told The Edge Financial Daily.
Dzaiddin is an adviser at law firm Skrine, which acts for one of the parties in the merger.
On Oct 21, Bursa’s Listing Committee ruled that the EPF cannot vote in the mega merger on grounds that there was a potential conflict of interest as the pension fund is a common major shareholder of all three financial institutions. It is the single-largest shareholder of RHBCap and MBSB with a 41.5% and 64.6% stake respectively, and holds a 14.6% stake in CIMB. It is understood that the decision by the 10-member Listing Committee on that day was unanimous.
On Oct 31, however, RHBCap and MBSB each, at the EPF’s behest, submitted an appeal to Bursa to reconsider the decision. The EPF is keen to vote only at the RHBCap and MBSB levels.
While the EPF is unlikely to have any fresh reasons for pleading its case, an oral presentation at the Bursa meeting tomorrow could help it to explain its earlier reasons more effectively, a source said.
Analysts and industry observers, however, doubt Bursa will change its stance, saying the EPF may have to relook at its investment strategies in Malaysia. The EPF owns more than 5% equity interest in over 100 companies and could find itself in a similar situation in future.
Bursa, in explaining its rejection to RHBCap and MBSB on Oct 21, noted that the EPF’s position was not the same as the other shareholders of the two companies. It said the pension fund’s controlling stake in the two companies put it in a position of “significant influence” and also pointed out that the EPF had prior knowledge of the proposed merger as it was notified by CIMB. Sources close to the EPF, however, said the EPF was merely notified of CIMB’s intention to explore a merger with the other two parties and that it was not privy to any other information.
As it stands, the merger has been structured such that RHBCap will be acquiring larger rival CIMB’s assets and liabilities via a share swap.
If the EPF is allowed to vote with its 41.5% stake in RHBCap, the merger is pretty much a done deal, if it votes in favour of it. This is because as the acquirer, RHBCap needs only 50%-plus-one share approval for the deal to go through.
If the EPF cannot vote, then it would be a foreign party — RHBCap’s second largest shareholder, Abu Dhabi’s Aabar Investments PJS with its 21.2% stake — that would influence the merger’s outcome. Without the EPF, Aabar will hold a 36.2% vote, which means that if it does not agree to the deal, it will be tougher — though not impossible — for the merger to go through.
This article first appeared in The Edge Financial Daily, on November 27, 2014.