EPF, Khazanah exit EON Cap

Monday January 4, 2010

EPF, Khazanah exit EON Cap
Move likely to end with Hong Leong Bank in control

PETALING JAYA: Institutional investors, Khazanah Nasional Bhd and the Employees Provident Fund (EPF), are believed to have agreed to sell their combined 20.7% stake in EON Capital Bhd, sources told StarBiz.

This followed an earlier decision by two major shareholders – Rin Kei Mei and Tan Sri Tiong Hiew King – to seek permission to negotiate with Hong Leong Bank for the sale of their combined indirect stake of 31.7%.

“The pending deal for Hong Leong Bank’s proposed buyout of EON Capital Bhd seems to have reached a tipping point,’’ a source said. “The move of placing an additional 20.7% of EON Cap shares, on top of the combined indirect 31.7% held by Rin and Tiong, into Hong Leong’s hands would appear to seal EON Cap’s fate of being absorbed into an enlarged Hong Leong banking group.’’

The potential merged entity of Hong Leong Bank and EON Cap will create Malaysia’s fourth largest bank after Malayan Banking Bhd, CIMB Bank and Public Bank.

The sale by Khazanah and EPF of their respective stakes in EON Cap to Hong Leong will not come as a surprise to market watchers, given that the two state institutions have long mulled rationalising their bank holdings.

Khazanah and EPF already have a 28.4% and 57.5% respectively in CIMB Bank and RHB Capital Bhd.

According to a source familiar with the takeover bid, Hong Leong’s offer is likely to be pegged at RM5.50-RM6 per share.

“Khazanah and EPF are making this move to be in step with the larger government agenda of inducing market-driven consolidation of the banking sector, which many see as still lacking in scale and capital to meet the challenges of the next decade,’’ the source commented.

So far, Hong Leong Bank has approval from Bank Negara to negotiate with Rin through his private vehicles – Kualapura (M) Sdn Bhd and Lintang Emas Sdn Bhd – and Tiong via RH Development Corp Sdn Bhd.

Hong Leong is also believed to have asked for permission to talk to EON Cap as an institution, and not to individual or targeted shareholders, on its proposed takeover.

That approval is said to be still pending.

It is believed that the board of EON Cap, which met on Thursday, was advised to seek approval to negotiate on an institutional level with Hong Leong Bank on the latter’s proposed buyout offer.
Primus Partners (HK) Ltd, the private equity firm that had bought 20.2% of EON Cap at RM9.55 per share or RM1.34bil, is said to be very sore at the turn of events which involves an offer price from Hong Leong that values EON Cap at less than 1.3 times book value. The stock closed at RM6.84 on Thursday.

Primus, according to sources, is suggesting that it is better to go to the open market where EON Cap may fetch a higher counter bid and minority shareholders may also get a better deal.
Last week, StarBiz reported that Primus was believed to have approached Singapore’s Temasek Holdings Ltd for a joint-bid potentially through the Alliance banking group, in which Temasek holds 29.27%.

Some observers said the proposal was likely to be put to shareholders for their vote.


http://biz.thestar.com.my/news/story.asp?file=/2010/1/4/business/5402776&sec=business