A CIMB Bank branch is seen in Kuala Lumpur. Malaysian state pension fund Employees Provident Fund (EPF) will not be allowed by the nation’s bourse to vote in the proposed merger of CIMB Group and two rivals as it is a major shareholder in all of the banks.
Reuters
Kuala Lumpur
Malaysian state pension fund Employees Provident Fund (EPF) will not be allowed by the nation’s bourse to vote in the proposed merger of CIMB Group Holdings Bhd and two rivals as it is a major shareholder in all of the banks.
The move may open the way for Abu Dhabi-based Aabar Investments, a shareholder in one of the lenders – RHB Capital Bhd – to have a bigger say in shaping the creation of Malaysia’s biggest bank which financial sources have said could have a market value of $22bn.
Aabar and OSK Holding Bhd, the second and third largest shareholders in RHB, would see their combined voting power in the lender increase to 53% from 31% if the EPF is barred from voting.
There has been market speculation that Aabar will seek terms more favourable to itself. Aabar has repeatedly declined to comment on the merger. Officials for OSK did not immediately respond to requests for comment.
The EPF, which bankers have said is in favour of the deal, had asked the nation’s bourse for a waiver to rules which state that it should not vote, arguing that the interests of its 14mn members are at stake. The fund owns about 14.5% of CIMB, 41% of RHB and 65% of the third bank Malaysia Building Society Bhd.
“There are no adequate justifications that the potential conflict of interests involving EPF has been eliminated or sufficiently mitigated,” a Malaysia Building Society statement quoted the bourse as saying.
Shares in all three banks were suspended yesterday pending a material announcement. Trade will resume tomorrow as today is a public holiday.
The bourse was also quoted as saying that the EPF had had prior knowledge of the deal talks before they were disclosed. The EPF said in September that it had not been part of any of the discussions about the proposed merger.
A three-way combination would give birth to a banking group with assets totalling around $190bn, surpassing Malayan Banking Bhd (Maybank) and making it Southeast Asia’s fourth-biggest bank. Under a complicated deal structure submitted to the central bank for approval, RHB Capital will issue shares to acquire the much larger CIMB but CIMB shareholders will own 70% of the merged entity.
Under Malaysian listing rules, RHB only needs to gain the approval of 50% of its shareholders if it is the acquirer. If CIMB bought RHB, then it would need to gain approval from 75% of the seller’s shareholders.
