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CIMB, RHB Capital and MBSB in merger to create M’sia’s biggest bank

KUALA LUMPUR — CIMB Group Holdings, RHB Capita l and Malaysia Building Society Berhad (MBSB) have agreed to a three-way merger to create a mega-entity valued at RM72.5 billion (S$28.4 billion) that will overtake incumbent Malayan Banking (Maybank) as the country’s largest banking group by assets.

Malaysia's RHB Bank logo is seen at its branch in Kuala Lumpur. Malaysia's CIMB Group, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) have agreed on a merger deal that will create the country's biggest banking group. Photo: Reuters.

Malaysia's RHB Bank logo is seen at its branch in Kuala Lumpur. Malaysia's CIMB Group, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) have agreed on a merger deal that will create the country's biggest banking group. Photo: Reuters.

KUALA LUMPUR — CIMB Group Holdings, RHB Capita l and Malaysia Building Society Berhad (MBSB) have agreed to a three-way merger to create a mega-entity valued at RM72.5 billion (S$28.4 billion) that will overtake incumbent Malayan Banking (Maybank) as the country’s largest banking group by assets.

The multi-layered transaction involves RHB issuing new shares to acquire its larger competitor CIMB for RM60.6 billion, offering one share for every 1.38 CIMB share, while the two lenders’ Islamic banking units will combine with MBSB to form a Syariah-compliant bank that will be a subsidiary of the merged entity, the companies said in an aftermarket filing with Bursa Malaysia yesterday.

The share swap is based on a benchmark price of RM7.27 per CIMB share and RM10.03 per RHB share. After the merger, CIMB shareholders will own 70 per cent of the merged entity while RHB shareholders will hold the remaining 30 per cent. In tandem, CIMB’s Islamic unit will acquire MBSB and RHB’s Syariah-compliant banking arm for a combined RM11.9 billion, said the statement.

The companies have applied to Bank Negara, Malaysia’s central bank, for approval of the merger. They will begin due diligence with the aim of signing a definitive sale and purchase agreement early next year, said the statement. They will seek other regulatory and shareholder approvals after that.

“This exercise will cement CIMB Group’s position among the top banks in ASEAN and bring a host of value- creation opportunities for all our stakeholders,” said Mr Zafrul Tengku Abdul Aziz, Acting Group Chief Executive, CIMB Group.

RHB Managing Director Kellee Kam said: “The RHB Banking Group has enjoyed tremendous progress in the last few years ... This merger is a natural step in our growth story, enabling us to become a regional financial powerhouse via the merged entity.”

The agreement comes three months after the banks got the green light from Bank Negara in July to hold exclusive discussions. It highlights the trend towards fewer and bigger lenders in Malaysia as overseas companies expand their presence in the country’s economy and leaders of the Association of Southeast Asian Nations press on with integrating the region’s markets.

“The idea to create a bigger banking group will enable the enlarged entity to widen its regional footprint,” said Mr James Lau, investment director at Pheim Asset Management Asia in Kuala Lumpur. “The market could get excited again.”

The combined entity will hold total assets of RM629 billion, surpassing Maybank’s RM583.4 billion, according to data compiled by Bloomberg based on statements for the quarter ended June 30. It will also enjoy a 23 per cent share of the domestic loan market compared with Maybank’s 18 per cent. However, the merged entity will still lag behind Singapore’s DBS Group Holdings, which has more than US$300 billion of assets. DBS, which is Southeast Asia’s biggest bank, also has a much higher market capitalisation of about S$45 billion.

The deal, structured as a reverse takeover, may allow the firms to overcome resistance from Abu Dhabi-based Aabar Investments PJSC, RHB’s second-largest shareholder, as an outright acquisition by CIMB would require approval from 75 per cent of RHB shareholders. “Both sides have to convince Aabar this merger is good for everybody. They will have to convince Aabar that the bigger group is better, rather than being an investor in RHB alone,” said Mr Ang Kok Heng, chief investment officer of Phillip Capital Management in Kuala Lumpur. AGENCIES

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