Thursday 28 Mar 2024
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KUALA LUMPUR (Aug 3): The potential merger between RHB Capital Bhd and AMMB Holdings Bhd has been put on hold due to the current political headwinds, according to the latest issue of the digitalEdge Weekly, in view of the current political headwinds.

A source familiar with the matter told the weekly that the initial plan was to merge the two groups in a share swap valued at about US$10 billion (RM38.25 billion), under which RHB (fundamental: 1.5; valuation: 2.1) would be the acquirer.

“The banks’ common major shareholder, the Employees Provident Fund (EPF), would have emerged as the biggest shareholder in the enlarged entity,” said the source.

Interestingly, CIMB Investment Bank had mooted the merger some months ago, and had been advising the two banks on it, according to the source.

“There were high-level talks, the key shareholders of the banks were consulted and seemed supportive but then a few weeks ago, it was decided that with the current political headwinds, this was not a good time to propose a merger,” the source said.

On July 2, The Wall Street Journal reported alleged transfers of up to US$700 milllion from entities linked to embattled state-owned 1Malaysia Development Bhd to two bank accounts within the AMMB group under Prime Minister Datuk Seri Najib Razak’s name.

Subsequently, Najib denied taking the money for personal gain and saw the allegations as political sabotage. A special task force is now probing those allegations.

Although AMMB (fundamental: 1.5; valuation: 3.0) has long been viewed as a potential M&A candidate, industry sources said the bank is likely to lay low on any such activity for now.

To recap, RHB, CIMB Group Holdings Bhd and Malaysia Building Society Bhd aborted plans for a mega merger earlier this year after six months of talks, citing unfavourable economic conditions.

Observers noted that CIMB Investment’s role in putting together a deal between RHB and AMMB is not the first time it has initiated a mega deal for other parties, but it would be the first time the investment bank is mooting a merger of rival banking groups.

Nevertheless, it has played the role of adviser in past banking mergers, as in the merger of Public Bank Bhd and Hock Hua Bank Bhd in 2000 by CIMB (then known as Commerce International Merchant Bankers Bhd).

At 12.05pm, RHB Capital fell 5 sen or 0.7% to RM7.38, bringing its market capitalisation to RM19.23 billion.

AMMB rose 9 sen or 1.6% to RM5.68, translating to a market capitalisation of RM16.85 billion.

(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.)

 

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