MALAYSIA: Following the
suspension of trading in shares on Bursa Malaysia, CIMB Group Holdings
(CIMB Group), RHB Capital and Malaysia Building Society (MBSB) yesterday
submitted an application to Bank Negara Malaysia (BNM) for the approval
of the banks’ three-way merger: accompanied by the creation of an Islamic
megabank through the combining of its three subsidiaries.
Whilst the banks have emerged from the 90-day negotiation period with an
agreed proposal, there is still some way to go till its conclusion – the
success of which remains largely contingent on whether BNM allows common
shareholder EPF to vote. Ahmad Zaini Othman, the president and CEO of
MBSB, highlights: “The strategic rationale for the merger and the subsequent
creation of a mega-Islamic bank is clear and we’re focused on getting
this to the finish line.” The banks will now move towards due diligence
with the aim of signing sale and purchase agreements in early 2015 and a
predicted completion for the deal in mid-2015.
Under discussion since the 10th July, alongside the primary
merger process the application also proposes the disposal by RHB Islamic
of all of its assets and liabilities to CIMB Islamic. The disposal will
be made in consideration for new ordinary shares in CIMB Islamic, at a
benchmark price of RM3.53 (US$1.07) per RHB Islamic share based on 1.18
billion RHB Islamic shares as at the 31st March 2014, and
RM5.4 (US$1.65) per CIMB Islamic share. This is to be accompanied by the
simultaneous acquisition of the assets and liabilities of MBSB by CIMB
Islamic, at a price of RM2.82 (US$0.86) per MBSB share, with MBSB
shareholders having the option of receiving cash or CIMB Islamic shares.
It is anticipated that the proposed megabank will remain a subsidiary of
the merged entity of CIMB and RHB, although the document makes it clear
that the CIMB-RHB merger is not conditional on the three-way tie up or
vice versa – suggesting that a new Islamic entity could be expected
regardless of the overall outcome. Upon completion, IFN has learned from
a senior industry source that the new Islamic bank is likely to be housed
at the current RHB headquarters in Kuala Lumpur.
Between now and 2015, however, there are still many questions that have
yet to be answered – including the management structure of the new
institution, which poses an interesting conundrum for the Malaysian
Islamic banking landscape. With the merger bringing together a plethora
of the most senior leaders in the industry (including Badlisyah Abdul
Ghani, CEO of CIMB Islamic; Othman, also a founder and former CEO of
AmIslamic; Ibrahim Hassan, the managing director of RHB Islamic; Yazit
Yusoff, former head of RHB-acquired OSK's Islamic banking division; and
Mohamad Safri Shahul Hamid, deputy CEO of CIMB Islamic) there will be a
glut of talent that could lead to a reshuffle in the leadership of the
wider sector.
Expected to remain under the flag of CIMB Islamic, we can perhaps expect
Badlisyah to retain the top position – but where does that leave the
rest? With some departures almost inevitable, perhaps those Islamic banks
that are still looking for a strong leader (such as Al Rajhi Bank, which
saw the recent departure of CEO Azrulnizam Abdul Aziz) could also benefit
from the deal. Although none of the relevant leaders were able to comment
when contacted by IFN this morning, perhaps we should expect even wider
shockwaves through the industry before the dust settles.
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