K&N Kenanga Holdings Bhd. (KNK), the Malaysian brokerage backed by Deutsche Bank AG, is close to an agreement to buy the investment banking and broking unit of ECM Libra Financial Group Bhd. (ECML) for about 900 million ringgit ($298 million), according to three people familiar with the matter.
Kenanga may pay in cash and stock, two of the people said today, declining to be identified as the information is private. The sale won’t include ECM Libra’s asset management operations, they said.
Malaysian banks and brokerages have been merging amid increased competition from foreign lenders including Bank of China Ltd. and Sumitomo Mitsui Banking Corp. Hong Leong Bank Bhd. (HLBK) acquired EON Capital Bhd. for $1.7 billion in May, while RHB Capital Bhd. is seeking central bank approval to buy OSK Holdings Bhd.’s investment bank.
Kenanga’s head of group corporate affairs Siti Maslinda Sheikh Othman wasn’t immediately available to comment. ECM Libra spokeswoman Maureen Jeyasooriar declined to comment on the sale.
Kenanga’s board is expected to meet later today to approve the deal, one person said.
The sale will help Azman Hashim, ECM Libra’s biggest shareholder, meet Malaysian 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.
1.4 Times Book Value
Kenanga rose 0.7 percent to 68 sen at 12:30 a.m. in Kuala Lumpur trading, while ECM Libra was unchanged at 79 sen. The country’s benchmark stock index was little changed.
The 900 million-ringgit price equates to about 1.4 times the ECM Libra unit’s book value, said two of the people. That compares with a median 1.57 times for 25 acquisitions of banks, investment companies, and diversified financial companies in Southeast Asia over the past year, according to data compiled by Bloomberg.
Deutsche Bank, through Deutsche Asia Pacific Holdings Pte., holds a 16.6 percent stake in Kenanga, according to the company’s website. The company’s biggest shareholder is CMS Capital Sdn., with a 25.1 percent stake.
Kenanga is Malaysia’s seventh-biggest equities broker by trading value, while ECM Libra is No. 10, according to the stock exchange’s website.
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