Shares of RHB Capital (RHBC) Bhd., Malaysia's fourth-largest bank, surged to more than a six-year high after EON Capital Bhd. and Kuwait Finance House made competing bids for the company.
EON, whose investors include Malaysian tycoon Syed Mokhtar Al-Bukhary, yesterday made offers for RHB Capital and its parent, Rashid Hussain Bhd., that may cost as much as 6.33 billion ringgit ($1.8 billion), based on Bloomberg calculations. Rashid Hussain owns 65 percent of RHB Capital. EON shares sank today.
Kuwait Finance House, the Persian Gulf's biggest Islamic investment bank, yesterday bid 2.16 billion ringgit for Utama Banking Group Bhd.'s 33 percent stake in Rashid Hussain under a plan to buy out the group. The suitors join overseas banks such as Australia & New Zealand Banking Group Ltd. seeking a foothold in Asia's biggest Islamic finance center.
``Kuwait Finance would add more value to RHB compared with EON, as it will take it to the next level of Islamic banking,'' said Mushtaq Ibrahim, who manages about $1.4 billion of assets at Amanah SSCM Asset Management Bhd.
Shares of Kuala Lumpur-based RHB Capital rose 28 sen, or 6.5 percent, to 4.60 ringgit, the highest closing price since June 13, 2000. Rashid Hussain shares climbed 5 sen to 1.73 ringgit.
``RHB is the clear-cut winner if this deal goes through,'' said Chan Ken Yew, an analyst at OSK Research Sdn in Kuala Lumpur, following EON's announcement. ``For EON's shareholders, it's a bit mixed.'' A bidding war between EON and Kuwait Finance is possible, he said.
EON stock dropped 5.5 percent to 6.85 ringgit, having earlier plunged as much as 13 percent.
EON said it bid 1.8 ringgit for each Rashid Hussain share and offered to buy other securities such as loan stocks and warrants. That transaction may cost the company as much as 3.27 billion ringgit, according to the offer prices for each of the five sets of securities.
EON said it will then offer 4.8 ringgit for each RHB Capital share, valuing the bank at 8.75 billion ringgit. The remaining 35 percent of RHB Capital, if EON's offer for Rashid Hussain is successful, would cost EON 3.06 billion ringgit.
The transactions need approval from Malaysia's Securities Commission, the Ministry of Finance and the central bank, EON said. It expects the deal to be completed by the middle of 2007.
The interest from foreign investors follows the central bank's decision on Nov. 15 last year to allow financial services companies to discuss mergers and acquisitions with more than one suitor at the same time.
Malaysia's Affin Holdings Bhd. said last month it's in talks to sell a stake to Hong Kong-based Bank of East Asia Ltd., while Australia & New Zealand Banking Group in November agreed to buy a stake in AMMB Holdings Bhd.
EON is 20 percent owned by DRB-Hicom Bhd. (DRB), which is controlled by Syed Mokhtar. Khazanah Nasional Bhd., the Malaysian government's investment unit, owns 10 percent of EON.
The entry of new shareholders at Rashid Hussain may help the company cut debt and return to profit after it posted losses in the second and third quarters of 2006.
Rashid Hussain's borrowings stood at 3.74 billion ringgit as of Sept. 30, 2006, the company said in November. Some repayments are due in June this year, Bloomberg data show.
Kuwait Finance said on Feb. 5 its investment group plans to make an offer for the rest of Rashid Hussain after buying the stake from Utama Banking.
The offers from EON and Kuwait Finance aren't the only suggestions to revive Rashid Hussain. The Employees Provident Fund, which owns 31 percent of Rashid Hussain, last month proposed that the company sell its stake in RHB Capital back to shareholders to reduce borrowings.
Rashid Hussain is considering the plan, it said on Jan. 30.
Shareholders of Rashid Hussain should opt for Kuwait Finance's bid because it's worth 2 ringgit a share, Hwang-DBS Vickers said in a report today. RHB Capital shareholders would be better taking EON's offer, according to the report.
``The fundamentals of EON Capital are expected to improve after it acquires RHBC,'' Hwang-DBS Vickers said. EON would benefit from the higher profile of Rashid Hussain's brand and investment banking divisions, it said.
A spokesman for RHB Capital declined to comment or be identified. Salman Younis, head of Kuwait Finance House in Malaysia, couldn't be reached on his cell phone. EON Capital Chairman Syed Anwar Jamalullail was in a meeting, his secretary said. Utama Chairman Nik Hashim didn't return a message left at his office.
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