Abu Dhabi Commercial Bank PJSC (ADCB), the United Arab Emirates’ third-biggest bank, agreed to sell its 24.9 percent stake in Malaysian lender RHB Capital Bhd. (RHBC) to state-owned Aabar Investments PJSC to free up capital.
Aabar Investments, owned by the Abu Dhabi government, will pay 10.80 ringgit per share, they said in a joint statement today. This values the deal at 5.9 billion ringgit ($1.9 billion), based on calculations by Bloomberg. That means Abu Dhabi Commercial made a 51 percent gain after acquiring its stake for 3.9 billion ringgit in 2008.
“We have benefited tremendously from our ownership of RHB,” Abu Dhabi Commercial Chief Executive Officer Ala’a Eraiqat said in the statement. “We are now clearly focused on executing our strategy of being a UAE-centric bank.”
RHB, overtaken last month by Hong Leong Bank Bhd. as Malaysia’s fourth-largest lender, is the subject of a takeover battle between Malayan Banking Bhd. (MAY) and CIMB Group Holdings Bhd. (CIMB) A merger with either of these rivals could potentially create Southeast Asia’s biggest bank by market value.
Malaysian lenders are consolidating amid intensifying competition as more overseas lenders are granted licenses to operate in the Southeast Asian nation. Bahrain’s Elaf Bank B.S.C. was the latest to win an Islamic banking license on June 15.
Today’s deal means Abu Dhabi can remain a substantial shareholder supportive of a potential merger, Malaysian Prime Minister Najib Razak told reporters at a signing ceremony in Putrajaya, outside of the Malaysian capital.
“The sale will result in the release of capital,” Abu Dhabi Commercial said in the statement.
The price paid is an 11 percent premium to RHB’s closing share price of 9.75 ringgit in Kuala Lumpur today.
“We are impressed by the strong performance achieved by RHB,” Aabar Investments Chief Executive Officer Mohamed Badawy Al-Husseiny said in the statement. “We are excited by the opportunity to potentially participate in domestic consolidation and regional expansion.”
Malayan Banking, the country’s biggest lender known also as Maybank, and its largest local rival last month won separate approvals from the Malaysian central bank to begin competing merger talks with RHB.
The combined capitalization of Maybank and RHB would be $29.2 billion, based on today’s closing share prices, exceeding Singapore’s biggest lender DBS Group Holdings Bhd. CIMB and RHB’s joint market value would be $28 billion, also higher than DBS’s $26.2 billion.
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