EPF may have to contend with no voting on mega bank merger

PETALING JAYA: Following the dismissal of its appeal to Bursa Malaysia on its right to vote on the proposed mega-banking merger, the Employees Provident Fund (EPF) does not have many options left, said banking analysts.

One analyst said the EPF could not do anything about its predicament and would have to contend with not being able to vote as a shareholder of RHB Capital Bhd, in the proposed takeover of CIMB Group Holdings Bhd and Malaysia Building Society Bhd (MBSB).

On Oct 21, Bursa’s Listing Committee rejected the application made by the EPF to vote in the planned mega-merger. The EPF had asked Bursa for a waiver to rules that stated that it should not vote, arguing that the interests of its 14 million members were at stake.

It then appealed to Bursa to enable it to vote but on Wednesday the exchange’s listing committee upheld the decision to disallow the EPF from voting, citing that there were “no adequate justifications” that the potential conflict of interest involving the EPF had been eliminated.

Bursa had earlier said that the EPF was a common shareholder in all three financial institutions, thus giving rise to a potential conflict of interest. The EPF is the single largest shareholder of RHB Cap with a 41.5% stake, as well as of MBSB with a 64.6% stake. The pension fund is also a substantial shareholder of CIMB with a 14.6% interest.

However, the same analyst said that it was still possible for the deal to go through, even without EPF’s votes, as it was structured in a way to ensure it could successfully go through. “This is because RHB Cap only requires a 50% plus one vote instead of the 75% acceptances which could have been an uphill task,” the analyst said. Past reports said Aabar Investment, the second largest shareholder of RHB Cap with a 21.22% stake, would vote in favour of the deal, although other reports had indicated that Aabar might hold out for a higher value for its RHB Cap shares.

However, another analyst said the EPF still had the option of selling down its stake in CIMB, which would then remove the issue of conflict, and entitle the EPF to vote as shareholder of RHB Cap.

“If the EPF were to sell down or all of its stake, then it would no longer be a common shareholder in all three financial institutions or be a related party in the transaction,” the analyst said. CIMB’s market capitalisation as at Dec 11 stood at RM46.4bil. Should the EPF pare its stake down to 5%, it would be selling off some RM4.46bil in market capitalisation.

There have been indications that the EPF could sell off its stake to other government-linked investment companies.