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Malaysia’s Kenanga Said to Be in Talks to Buy ECM Bank Unit

K&N Kenanga Holdings Bhd. (KNK), a Malaysian brokerage part-owned by Deutsche Bank AG (DBK), is in talks to buy the investment banking and broking operations of local rival ECM Libra Financial Group Bhd., two people familiar with the matter said.

ECM Libra, which has a market capitalization of about 669 million ringgit ($213 million), would retain only its asset management business after the sale, one person said, declining to be identified as talks are private. That unit accounted for about 3 percent of ECM Libra’s revenue in the quarter ending July 31.

The sale would help Azman Hashim, ECM Libra’s biggest shareholder, meet Malaysian central bank licensing rules that bar a single individual from being a key owner of more than one investment bank. Azman, who owns 24 percent of ECM Libra, also indirectly holds almost 17 percent of AMMB Holdings Bhd. (AMM), Malaysia’s fifth-biggest lender by market value, according to data compiled by Bloomberg.

Kenanga is Malaysia’s eighth-biggest equities broker by trading volume, while ECM Libra is No. 10, according the stock exchange’s website. Kenanga spokesman Siti Maslinda Sheikh Othman wasn’t immediately available to comment. ECM Libra spokeswoman Maureen Jeyasooriar declined to comment on the deal.

ECM Libra rose 2.6 percent to 80 sen in Kuala Lumpur trading today. Kenanga fell 0.7 percent to 69.5 sen, while the benchmark FTSE Bursa Malaysia KLCI Index climbed 0.9 percent. Edge Financial Daily earlier reported the talks.

Book Value

Banks in Southeast Asia are engaging in a wave of mergers. RHB Capital Bhd. (RHBC), Malaysia’s sixth-biggest bank by market value, is in talks to take over local rival OSK Holdings Bhd. (OSK)’s investment banking unit. Malayan Banking Bhd., the country’s largest lender, acquired Singapore’s Kim Eng Holdings Ltd. in May for S$1.79 billion ($1.4 billion).

ECM Libra is seeking payment in cash of as much as 1.6 times the investment banking operation’s book value, one of the people said. Including the asset management business, ECM’s common equity stood at 1 billion ringgit at the end of July, according to Bloomberg data. (ECML)

Should the sale go through, ECM Libra will decide whether to return the proceeds to shareholders or acquire a new business, one person said. Kenanga has yet to receive regulatory approval for the acquisition from the central bank and the securities regulator, the people said.

Deutsche Bank, through Deutsche Asia Pacific Holdings Pte., holds a 16.6 percent stake in Kuala Lumpur-based Kenanga, according to the company’s website. The company’s biggest shareholder is CMS Capital Sdn., with a 25.1 percent stake.

To contact the reporters on this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net; Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net

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