PETALING JAYA: Kenanga Investment Bank Bhd’s proposed deal to acquire stockbroker Inter-Pacific Securities Sdn Bhd (Interpac) has been called off.
In a filing with Bursa Malaysia yesterday, Kenanga said that both parties had “mutually agreed to terminate the proposed acquisition.” However, no reason for the termination was given.
Sources said this was due primarily to “market conditions”, but did not elaborate.
In May, just after the 14th general election, Kenanga said it had been given the green light to start talks in relation to the purchase of the stockbroking business of Interpac.
The proposed deal was seen as the first large corporate deal to be announced under the new Pakatan Harapan government that had come into power in that same month.
A source said amid the current volatile markets, the parties could not reach an agreement on the terms of the deal.
“There were too many things to iron out,” said the source. If it had materialised, the parties, Kenanga and Inter-Pacific, which is the stockbroking arm of Berjaya Corp Bhd (BCorp) controlled by local tycoon Tan Sri Vincent Tan Chee Yioun, would have created one of the largest stockbrokers in the country.
Tan’s BCorp wholly owns Berjaya Capital Bhd, which owns 91.5% of Inter-Pacific Capital Sdn Bhd which, in turn, owns all of Interpac. Given that the proposed deal would have been financed by shares in Kenanga as well as cash, Tan through BCorp could very likely have emerged as one of the larger shareholders in the merged entity.
Pricing-wise, in the proposed deal, it was envisaged that Kenanga would not have forked out a premium for its smaller rival’s broking business to expand its remisier base.
“Going by industry benchmark, Kenanga should be looking to pay around one to 1.1 times book value for Interpac.
“That should work out to less than RM120mil,” a banker had estimated earlier.
Kenanga Investment, founded in 1973, offers a wide range of financial services operating through 32 branches nationwide. It also reportedly has the largest remisier network in the country.
It counts Sarawak-based CMS Capital Sdn Bhd as its single largest shareholder.
CMS Capital is the private company linked to former Sarawak Chief Minister Tun Abdul Taib Mahmud. Interpac, meanwhile, was set up in 1972 and has five branches across Kuala Lumpur, Penang and Johor Baru. It has a paid-up capital of RM250mil. The last major merger and acquisition deal in the stockbroking industry here was about four years ago when Affin Holdings Bhd acquired Hwang-DBS Investment Bhd at 1.3 times price-to-book.
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