Thursday 28 Mar 2024
By
main news image

KUALA LUMPUR: The Employees Provident Fund (EPF) seems to have reached the end of the road with its attempts to get Bursa Malaysia to allow it to have a vote in the proposed merger of CIMB Group Holdings Bhd, RHB Capital Bhd (RHBCap) and Malaysia Building Society Bhd (MBSB).

Yesterday, Bursa’s Appeals Committee (AC) rejected the EPF’s appeal to vote in the mega merger.

An EPF spokesman told The Edge Financial Daily that the pension fund will now explore “other avenues”, but did not elaborate.

The AC, said to be chaired by committee member Datuk Mohammed Adnan Shuaib, had allowed EPF officials to plead their case by making a presentation at a meeting yesterday. However, the committee stood by an Oct 21 decision by Bursa’s Listing Committee that the pension fund cannot have a vote on account of it being a common major shareholder of all three entities involved in the merger.

“We are appreciative of the opportunity to have oral representation at the meeting. Even though we don’t necessarily agree with the decision, we are respectful of it. We will look at what other avenues are available to us as we need to ensure that the interests of our members are protected,” the EPF spokesman said.

Analysts said they were not surprised by the decision as a reversal of stance would have set an unhealthy precedent.

Under Bursa’s listing rules, the EPF cannot vote as it has a 41.5% stake in RHBCap, 64.6% in MBSB and 14.6% in CIMB, which gives rise to a potential conflict of interest.

RHBCap and MBSB announced in stock exchange filings last night that they had each received a letter from Bursa informing them of the rejection

“The AC decided that the matters raised and the grounds of appeal put forth did not justify a departure from the decision of the Listing Committee. In particular, there are no adequate justifications that the potential conflict of interests involving the EPF has been eliminated or sufficiently mitigated. Accordingly, the AC decided to dismiss the appeal and uphold the decision of the Listing Committee,” the letter had read.

If the EPF was allowed to vote in RHBCap with its 41.5% stake, the merger would pretty much be a done deal if it was for the merger. This is because as the acquirer, RHBCap needs only 50%-plus-one share approval for the deal to go through.

The merger has been structured such that RHBCap will acquire larger rival CIMB’s assets and liabilities via a share swap, after which their respective Islamic banks will merge with MBSB to form a mega Islamic bank.

Now that the EPF cannot vote, RHBCap’s second largest shareholder, Abu Dhabi’s Aabar Investments PJS with its 21.2% stake, has a larger say in the merger’s outcome. Without the EPF, Aabar will hold a 36.2% vote, which means that if it does not agree to a deal, it would be tougher — though not impossible — for the merger to go through.

For it to go through, it will need the support of RHBCap’s other substantial shareholder, OSK Holdings Bhd with its 9.9% stake (but a 16.9% vote with the EPF out of the picture) and most of RHB’s minority shareholders, which include investment funds like Skim Amanah Saham Bumiputera and Kumpulan Wang Persaraan.

“This merger will now have to go on the merits of the deal,” a source close to the merger told The Edge Financial Daily.

It is no secret that Aabar could be a stumbling block to any merger as it has been seeking a high price of RM12 a share for its stake in RHBCap — much higher than the RM10.03 RHBCap was valued at in this deal.

Aabar acquired the shares at RM10.80 each in 2011 from its sister company Abu Dhabi Commercial Bank, a left-to-right-hand transaction.

 

This article first appeared in The Edge Financial Daily, on December 11, 2014.

      Print
      Text Size
      Share