CIMB Group-RHB Capital in share swap to form Asean financial powerhouse (Update)

KUALA LUMPUR: CIMB Group Holdings Bhd shareholders will own 70% of the merged CIMB-RHB Capital Group while RHB Capital shareholders will hold the remaining 30% under a proposed merger of the banking groups with Malaysia Building Society Bhd (MBSB).

“The merger will see a share swap between CIMB Group and RHB Capital at an exchange ratio of 1.38 (one RHB Capital share for 1.38 CIMB Group share). 

“This is based on a benchmark price of RM7.27 per CIMB Group share and RM10.03 per RHB Capital share; translating into price-to-book ratios as at 30 June 2014 of 1.70 times and 1.44 times for CIMB Group and RHB Capital respectively,” according to the joint statement issued on Thursday.

CIMB Group Holdings Bhd, RHB Capital and MBSB have submitted an application to Bank Negara Malaysia to seek approval for its proposed three-way merger. 

The banking group said in a joint statement on Thursday the merged entity would be a major Asean financial powerhouse and a mega-Islamic bank.

Commenting on the merged CIMB-RHB Capital Group, the acting group chief executive of CIMB Group Tengku Datuk Zafrul Tengku Abdul Aziz said: “We are extremely pleased to have been able to reach this stage in the process. 

“This exercise will cement CIMB Group’s position amongst the top banks in Asean and bring a host of value creation opportunities for all our stakeholders. We are excited that we can now move forward and work towards seeking the necessary approvals to effect this merger.”

RHB Capital Group managing director Kellee Kam said, “I am glad that we have been able to come this far in our negotiations in such short a time. The RHB Banking Group has enjoyed tremendous progress in the last few years, seeing us grow from strength to strength. 

“This merger is a natural step in our growth story, enabling us to become a regional financial powerhouse via the merged entity. 

“The task ahead for us now is to ensure that we meet all the expectations of our stakeholders, thereby creating new opportunities for our employees, enhanced services and product offerings for our customers, and increasing returns and value for our shareholders.”

Concurrently, CIMB Islamic, RHB Islamic and MBSB will merge to form a mega-Islamic Bank. 

“This will be done at a price of RM2.82 per MBSB share, and MBSB shareholders will have the option of receiving cash or CIMB Islamic shares as consideration. It is envisaged that the newly created mega-Islamic bank will remain a subsidiary of the merged CIMB-RHB in partnership with ex-MBSB and/or new strategic shareholders,” the statement said.

MBSB president and CEO Datuk Ahmad Zaini Othman said: “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. 

“This move charts another significant milestone in the history of MBSB since its inception and we are happy to be part of this corporate exercise.”

The parties will now move towards the due diligence process in view of signing a definitive sale and purchase agreements (SPA) in early 2015. 

Following the SPA, consent of other regulators and shareholders will be sought. The deal is expected to complete in mid-2015.

Banking , Corporate News , M&A , merger , Bank Negara , MBSB