KUALA LUMPUR (Jan 14): CIMB Group Holdings Bhd (fundamental score: 1.35; valuation score: 2.1), RHB Capital Bhd (RHBCap) (fundamental: 1.5; valuation: 2.1) and Malaysia Building Society Bhd (MBSB) (fundamental: 1.2; valuation: 1.6) announced today that they have ceased discussions on a proposed merger and creation of a mega Islamic bank in light of current economic conditions, according to a joint statement from the three financial institutions today.

“We had thoroughly deliberated the merger, and whilst we remain convinced that the combination of our three franchises follows sound strategic logic, we ultimately were not able to arrive at a value creating transaction for all stakeholders,” said Tengku Datuk Zafrul Tengku Abdul Aziz, acting group chief executive of CIMB.

In the statement, Zafrul added that the decision to cease discussions was arrived at after a detailed review of potential synergies that could be realistically delivered, especially in the current economic environment.

The cancellation of the merger deal confirms several reports published earlier by The Edge Weekly and The Edge Financial Daily.

“We undertook the discussions of the proposed merger on the premise that we would be able to arrive at a value enhancing proposal for our stakeholders and bring it to our respective shareholder. Protecting and creating stakeholder value is paramount to all parties and given the changes in environment we could not conclude a case to proceed further,” said RHBCap group managing director Kellee Kam in the joint statement.

Meanwhile, MBSB’s president and chief executive officer Datuk Ahmad Zaini bin Othman added that the opportunity to be a part of a mega Islamic bank was an exciting one.

“Given that the discussions have ceased, we can now continue to focus on the strength of our franchise and achieving the goals that we have originally set for ourselves,” said Zaini in the statement.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)