CIMB, RHB Cap, MBSB merger confirmed called off

KUALA LUMPUR: Six months after first announcing plans for the biggest banking merger in recent history, the three financial institutions involved have decided to call off the deal, citing unfavourable economic conditions and the inability to “arrive at a value-creating transaction for all stakeholders”.

CIMB Group Holdings Bhd , RHB Capital Bhd and Malaysia Building Society Bhd (MBSB), which first announced an intention to merge last July, said in a joint statement yesterday that they had ceased discussions on the proposed merger.

Last Friday, StarBiz had reported that there were “cracks in the merger”, citing that there was a problem with MBSB being part of the merger.

However, as of yesterday morning, there was still a glimmer of hope that the mega merger was on. Speaking at an event earlier in Kuala Lumpur, CIMB Group chairman Datuk Seri Nazir Razak told the media that the talks had not been called off yet and were at a very intense stage. “We are in the process of validating the business case for the merger based on the terms that we have negotiated.”

But he did hint that the wild card to the deal was an economic environment which had “changed somewhat”.

“We have said that there is limited revenue synergies from this deal and the real synergy upside would have to come from cost, and in a slow economic environment, cost synergies are a bit more difficult to achieve,” Nazir added.

In the joint statement issued yesterday, CIMB Group acting chief executive officer (CEO) Tengku Datuk Zafrul Tengku Abdul Aziz said: “We had thoroughly deliberated the merger, and whilst we remain convinced that the combination of our three franchises follows sound strategic logic, we ultimately were not able to arrive at a value-creating transaction for all stakeholders.

“The decision to cease discussions was arrived at after a detailed review of potential synergies that could be realistically delivered, especially in the current economic environment,” he added.

CIMB shares rose sharply on Tuesday, as speculation intensified that the merger would be called off, leading dealers to comment that investors perceived CIMB to be on the losing end if the merger took place.

Commenting on the deal being called off, Khazanah Nasional Bhd managing director (MD) Tan Sri Azman Mokhtar said on the sidelines of the 11th Khazanah Annual Review 2015 that “from a shareholder (point of view), we are quite happy that the markets have spoken and CIMB’s market capitalisation is up by some RM2bil over the last couple of days”. Khazanah is the single largest shareholder of CIMB with a 29.31% stake.

Azman also said CIMB had demonstrated the ability to grow in a disciplined way. “CIMB has walked way from a deal in the Philippines and that’s fine. There will be other opportunities.’

In the joint statement issued, RHB Cap group MD Kellee Kam said that the merger was undertaken based on the premise of value-creation for its respective shareholders, but said recent developments had hindered that.

“Protecting and creating stakeholder value is paramount to all parties, and given the changes in the environment, we could not conclude a case to proceed further. Nonetheless, we would like to thank all the parties involved in the discussions for the time and effort spent. We wish CIMB and MBSB well in all their future endeavours,” said Kam.

MBSB president and CEO Datuk Ahmad Zaini Othman, meanwhile, said: “The opportunity to be a part of a mega-Islamic bank was an exciting one for us. Given that the discussions have ceased, we can now continue to focus on the strength of our franchise and achieving the goals that we had originally set for ourselves. We thank everyone involved for their hard work.”

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