PETALING JAYA: The proposed RHB Capital Bhd-OSK Holdings Bhdmerger, due to be sealed soon, will be paid for entirely in shares, banking sources said.
OSK is expected to receive RHBCap shares worth around RM2bil the reported price of the deal in exchange for the former's investment banking business.
At this stage, it is not clear what OSK will do with the RHBCap shares.
Sources said it was likely OSK might hold on to the RHBCap shares for a while before deciding what to do.
“It is possible that some sort of agreement has been struck for OSK not to dispose of those shares immediately or to distribute them quickly to its (OSK's) shareholders via dividend in specie.
“This is to ensure that there would not be an immediate overhang of RHB shares in the market and more importantly, it will give OSK time to better understand what the merged entity is all about as well as understand RHBCap's plans going forward,” a banker said.
OSK, founded by Ong Leong Huat, has interests in banking and property. According to Bloomberg data, Ong's stake in OSK is 31.3%.
Earlier, it had been speculated that OSK and Ong may have preferred a cash element in the deal but sources said that was never part of the offer from RHBCap.
The merger makes sense for OSK as it is difficult to survive as a stand-alone stockbroking house, given the increasing competition in the industry. “It is better to be bank-backed, and selling out now at a relatively good valuation is a good idea,” a banking analyst said.
At RM2bil, this works out to around two times the book value of OSK's investment banking business.
Last year, Hong Leong Bank Bhd paid 1.4 times price-to-book for EON Capital Bhd.
Meanwhile, when contacted, an official from RHBCap said the banking outfit was awaiting Bank Negara approval for the proposed transaction.
“Hence, we are not in a position to say much about the structure of the transaction. Further details on the proposed merger will be shared upon obtaining approval from Bank Negara,” he said.
The deal, if and when it goes through, will create the largest stockbroking house in the country, overtaking CIMB Investment.
On RHBCap's future plans including a possible acquisition of Malaysia Building Society Bhd (MBSB), the RHB official said: “The group is always on the lookout for strategic opportunities that fit into its aspirations. Announcements will be made if such good opportunities arise.”
It was reported recently that MBSB, a non-bank lender to civil servants, could be a likely target of RHBCap after the deal with OSK was sealed, given that the Employees Provident Fund (EPF) is a common shareholder of both firms.
The EPF holds a 44.84% stake in RHBCap and a 65.5% stake in MBSB.
RHBCap and OSK finished 15 sen and one sen higher respectively at RM7.95 and RM1.80 yesterday.
Thursday March 1, 2012
