Malaysia’s CIMB, Maybank to Start Competing Merger Talks With RHB Capital

CIMB Group Holdings Bhd. (CIMB) and Malayan Banking Bhd. (MAY) won separate Malaysian central bank approval to begin competing merger talks with RHB Capital Bhd. (RHBC), triggering a takeover battle that may create Southeast Asia’s biggest bank.

The combined capitalization of CIMB and RHB would be $27.3 billion, based on today’s closing prices. Maybank could boost its market worth to $28.8 billion, which would exceed the $27.7 billion value for Singapore’s DBS Group Holdings Ltd. (DBS), the region’s largest lender.

“Potentially, this could lead to a bidding war for RHB,” said Jason Chong, who helps manage about $1 billion of assets as chief investment officer at Manulife Asset Management (Malaysia) Sdn. in Kuala Lumpur. “Between the two, the merger of RHB and CIMB would make more sense because with Maybank, there will be a lot more duplication of assets in terms of branches.”

Malaysia’s two biggest banks are seeking the acquisition to expand amid rising competition as the central bank grants more licenses to international players including Bank of China Ltd. Hong Leong Bank Bhd. this month bought EON Capital Bhd., while ECM Libra Financial Group Bhd. is said to have appointed an adviser to find a buyer.

“RHB will consider all proposals that are beneficial to shareholders,” Azlan Zainol, chairman of RHB’s banking unit, said in an interview today. “As far as I am concerned, I have not being officially notified on the proposals.”

Open to Merger

RHB is open to merging although nothing is currently planned, Azlan told reporters last month. He is also chief executive officer of the bank’s biggest shareholder, state-run pension fund Employees Provident Fund, which holds a 45 percent stake, according to data compiled by Bloomberg.

Abu Dhabi Commercial Bank PJSC (ADCB) has said it’s seeking to sell its 25 percent RHB interest. The United Arab Emirates’s third-biggest bank by assets appointed Goldman Sachs Group Inc. (GS) and Bank of America Corp.’s Merrill Lynch & Co. to advise on an exit, Chief Executive Officer Ala’a Eraiqat said last month.

RHB was this month overtaken as Malaysia’s fourth-biggest lender by assets following Hong Leong’s takeover of EON. RHB has operations spanning all key areas of financial services, including a branch network, treasury, investment banking and Islamic finance.

“It is incumbent on us to engage on this opportunity to put forward a value creating merger between the two banks and support the national banking consolidation agenda,” Nazir Razak, group chief executive officer at CIMB said in a statement today. “It is, however, very early days as negotiations have not even commenced.”

Playing Catch-Up

While Maybank is currently the country’s biggest lender by both assets and market value, its international investment banking operations have lagged rival CIMB.

In a bid to catch up, Maybank this month completed the S$798 million ($647 million) acquisition of a 44.6 percent stake in Kim Eng Holdings Ltd., a Singapore-based securities and investment-banking group, which has offices in countries including Hong Kong, Thailand, the Philippines and India.

An RHB merger “would be consistent with Maybank’s vision to become the regional financial services leader,” Maybank said in an e-mailed statement today.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net; Elffie Chew in Kuala Lumpur at echew16@bloomberg.net;

To contact the editors responsible for this story: Barry Porter at bporter10@bloomberg.net; Chitra Somayaji in Hong Kong at csomayaji@bloomberg.net.

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