CIMB, MBSB fall, RHB Cap rises on report mega bank merger may be off

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KUALA LUMPUR (Jan 12): Shares of CIMB Group Holdings Bhd and Malaysia Building Society Bhd (MBSB) ended lower in the morning session after The Edge Weekly reported of a high possibility, the mega bank merger might be called off.

As of midday, CIMB was traded at RM5.24, down 8 sen or 1.5% with 4.26 million shares done. The counter earlier rose to a high of RM5.35 before paring gains to settle at the current price.

MBSB, on the other hand, shed 20 sen or 8.30% to settle at RM2.22, with 8.81 million shares traded, making it the fourth largest loser across the bourse.

Its warrants also dropped 17 sen or 12.14% to RM1.23.

However, shares of RHB Capital Bhd (RHB Cap) gained 5 sen or 0.65% to RM7.71, with 1.07 million shares traded. The counter was traded between RM7.68 and RM7.72 today.
The Edge Weekly, in its latest issue, quoted sources close to the deal as saying  the proposed tripartite merger involving CIMB, RHB Cap and non-bank lender MBSB had a high chance of being called off.

They said RHB shareholders were seeking a revision to the terms, given the substantial fall in CIMB's share since the merger was proposed.

"Instead of an all-share deal, RHB now wants shares and cash for its merger with CIMB," a source told The Edge Weekly.

Apart from that, a source also said the economic situation and operating environment had become much more difficult and the estimated cost synergies at over RM1 billion would be harder to realise.

"When the modelling was done for the proposed merger, it was done based on certain assumptions but the market has changed so much since then.

"For example, the aspired revenue that the merger wants to achieve is looking tough to achieve now given the current operating landscape," the source said.

The source added that CIMB, the regional player of the three, had seen its financial performance suffer the most in recent quarters, mainly because of the tougher operating landscape in Indonesia.

CIMB's stock price has declined 24.2% to RM5.29 as of last Thursday since the structure of the mega merger was announced in October last year.

To recap, CIMB, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) had entered into a proposed merger talks in July last year to form a mega-Islamic Bank.

On Oct 9, 2014, CIMB, RHB Cap and MBSB announced that discussions had been concluded, with a share swap proposed between CIMB and RHB Cap.