Some analysts worry it may not be good in long term
PETALING JAYA: The hiccup in Malayan Banking Bhd’s (Maybank) RM8.8bil proposed acquisition of PT Bank Internasional Indonesia TBK (BII) went down well with the market yesterday with the stock surging close to a three-month high of RM7.90.
Maybank shares have fallen as much as 20% since the announcement was made in March amid talk that the deal was too costly.
In a statement to Bursa Malaysia on Tuesday, Maybank said Bank Negara had revoked its approval for the proposed acquisition which was earlier given under Section 29 of the Banking and Financial Institutions Act 1989.
The central bank had noted Indonesia’s regulation that Maybank had to sell down its stake by 20% to at least 300 public shareholders within two years and that this could result in the bank incurring “material losses”.
While most analysts agreed that the central bank’s decision augured well for Maybank, some took a different view.
“The share price rise is a knee-jerk reaction, but in the long term the central bank move is not good for Maybank, as it needs a foreign acquisition to fuel its future growth,” a local dealer told Reuters yesterday, adding that the bank had to move abroad as the domestic market was becoming too saturated.
“For Maybank, assuming that there is no financial recourse from rescinding the BII share sale agreement, this should be perceived positively by Maybank shareholders as the share price has fallen (since the announcement of the deal),” JPMorgan Equity Research said yesterday.
It added that it remained to be seen whether Bank Negara would reverse its decision should Indonesia’s Capital Market and Financial Institution Supervisory Agency (Bapepam) do a turnaround and offer a waiver to Maybank from its new takeover rule.
Kenanga Research in a report yesterday, however, said with runaway inflation threatening to derail Indonesia’s economic growth, “it may be a blessing in disguise that Maybank does not invest in BII.”
Meanwhile, Bloomberg reported that Maybank wanted the Indonesian capital markets regulator to either prolong the two-year period to cut its stake in BII or seek a waiver from the ruling.
It also reported that the country’s biggest lender was “committed” to the deal and would seek to resolve and complete the purchase by the end of September.
Maybank has paid a 10% deposit of RM480mil to Fullerton Financial Holdings Pte Ltd (a subsidiary of Singapore government’s investment arm Temasek Holdings), which some analysts said was refundable in the event that the bank was unable to obtain the necessary regulatory approvals.
Some, however, said the deposit would be forfeited if the deal fell through.
In March, Maybank had proposed to acquire Sorak Holdings Ltd, which has a 55.7% stake in BII, from Fullerton and Kookmin Bank for RM4.8bil cash.
Sorak is owned by the Temasek and South Korea’s Kookmin Bank. The acquisition was valued at about 4.6 times price-to-book.
Maybank would then have had to make a tender offer to buy the remaining 44.4% stake in BII, which would cost the bank another RM4bil, after the necessary approvals.
The takeover of BII would have made Maybank the largest foreign financial services company in Indonesia.
Keith Wee, a banking analyst at OSK Research, said while the central bank’s decision was “surprising”, it had set a precedent as its decision would “ultimately deter local banks from paying heavy premiums” for Indonesian banks.
Ongoing concerns over the group’s ability to raise funds for the deal were among the key factors capping Maybank’s share price performance, he added.
CIMB Research, which downgraded its call from “outperform” to “neutral” yesterday, said Maybank might revert to a higher dividend payout ratio of 60% to 70% if it did not have to reserve internal funds for the acquisition of BII.
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