Bursa says no to EPF vote in mega bank merger

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KUALA LUMPUR: Bursa Malaysia has rejected applications from both RHB Capital Bhd (RHBCap) and Malaysian Building Society Bhd (MBSB) for their common major shareholder — the Employees Provident Fund (EPF) — to vote in the mega merger, according to filings with the local bourse on Tuesday.

This confirmed the newsbreak by TheEdge Markets.com on Tuesday, which reported that Bursa was expected not to allow the EPF to vote in the proposed merger of RHBCap, CIMB Group Holdings Bhd and MBSB.

In arriving at its decision, Bursa said it took into consideration a few factors. This included the fact that the EPF had prior knowledge of the proposed merger as it was notified by CIMB before the issuance of the letter of intent by CIMB, dated July 9, 2014.

“The objective of the related party transaction framework under the Listing Requirements is to govern potential conflict of interest situations. In related party transactions, related parties may be able to assert influence over a listed issuer’s actions or transactions which then presents a risk of potential abuse to the listed issuer.

“By virtue of the EPF being the common major shareholder of all three affected companies (MBSB, RHBCap and CIMB), as well as being the single largest shareholder of both MBSB and RHBCap, there exists such a potential conflict of interest situation, where the EPF may be able to influence the proposed merger to its own benefit,” Bursa noted.

“As the single largest shareholder of MBSB and RHBCap and a major shareholder of CIMB, the EPF may benefit from the transaction as a shareholder of RHBCap and/or CIMB. As such, its overall position would differ from a party which is merely a shareholder of MBSB, especially given the differing terms and valuations applicable to these three affected companies,” the regulator said.

The EPF is the single-largest shareholder of RHBCap with a 41.5% equity interest and MBSB with 64.6%. It also holds 14.6% of CIMB.

The latest move by Bursa seems to be in line with the concerns of the Abu Dhabi government and RHBCap’s Middle Eastern investor — Aabar Investments PJSC.

On Sept 30, The Edge Financial Daily, quoting sources, reported that the Abu Dhabi government had formally reached out to the Malaysian government and expressed its concern about the EPF’s right to vote in the proposed mega merger.

With the EPF not being allowed to vote, RHBCap’s other substantial shareholder — Aabar — will hold the trump card. With its 21.2% stake in RHBCap, Aabar will hold a crucial vote for or against the deal.

Nevertheless, the proposed merger of CIMB, RHBCap and MBSB could still proceed even with Bursa saying “no” to the EPF.

“The three parties may still want to proceed, although the chances of getting shareholders’ approval will not be as good if the EPF can’t vote,” a source told The Edge Financial Daily.

This article first appeared in The Edge Financial Daily, on October 23, 2014.