KUALA LUMPUR: Malayan Banking Bhd (Maybank) may lose its RM480 million deposit if its proposed acquisition of PT Bank Internasional Indonesia (BII) falls through, the bank’s management told analysts in a conference here yesterday.
It is learnt that the management had said that while there is a possibility of having to forgo the deposit, the bank is taking measures to ensure the money is returned. The bank wants to exhaust all avenues in the search for an amicable solution.
“The bank is looking at all avenues of engagement and could lose its deposit only if no amicable solution is found by end-September, which is the long-stop date for the proposed acquisition,” the management was quoted as telling the analysts.
However, analysts said that even if Maybank has to forfeit the deposit, it would only shave off about 10 sen from its earnings per share for the financial year ending June 30, 2009.
Maybank had proposed in March to acquire 55.5% of BII from Singapore state investor Temasek Holdings’ wholly-owned subsidiary, Fullerton Financial Holdings Pte Ltd, for RM4.8 billion. The proposed purchase would trigger a mandatory general offer resulting in Maybank possibly holding 100% of BII.
In its announcement on the share sale agreement (SSA) with Fullerton, Maybank had said that it would pay 10% of the RM4.8 billion, or RM480 million, and the rest following the completion of the agreement.
JP Morgan, in a research note yesterday, pointed out that Maybank had paid the RM480 million, with the remaining RM4.3 billion due this week.
A refund would be made in the event of a default by Fullerton or if stipulated conditions were not met within six months of the SSA execution, according to Maybank’s March 23 announcement.
It said that the completion of the SSA would depend on the transaction passing” the fit and proper test as stipulated by Bank Indonesia”.
Furthermore, the transaction required consent and approval from “‘any governmental or regulatory body or relevant competent authority having jurisdiction over the entry into and completion of the SSA, whether in or outside Indonesia, being granted or obtained and being in full force as at the completion”.
For Maybank, the “spanner in the works” is Bank Negara Malaysia (BNM) which, on Tuesday, revoked its approval for the acquisition on grounds that Maybank would incur material losses as under the new takeover rules in Indonesia, Maybank would have to sell 20% of BII to at least 300 public shareholders within two years after undertaking the mandatory general offer.
Analysts present at the conference call yesterday said that BNM’s concern is BII’s share price valuation. At Rp460 per share currently, BII is valued at 29 times its FY12/08F earnings, much higher than the industry average of 15 to 20 times forward earnings multiple. If based on the industry average earnings multiple, BII is estimated to be valued between Rp237 and Rp316 per share, a 38% to 54% discount to the proposed tender offer price.
Maybank had previously met with Indonesia’s Badan Pengawas Pasar Modal and Lembaga Keuangan (Bapepam) to ask for a waiver from complying with the ruling, which Bapepam denied.
During the conference call, Maybank said it would continue discussions with Bapepam on the new public spread guidelines, adding that it would not have paid 4.6 times price-to-book value for BII had the guidelines been in place when it entered into the agreement with Temasek.
It also planned to approach Fullerton on how it could reduce potential losses from selling down the BII stake.
The bank also said it would not proceed to raise a further RM4 billion in Tier-1 capital until it had made significant headway with the BII acquisition and that it would use the RM3.5 billion raised for the acquisition to finance its purchase of MCB Bank of Pakistan and for organic growth.
CIMB Research said in a report yesterday that if the deal collapsed, Maybank could suffer repercussions. “In the longer term, growth prospects for Maybank will be dimmer if it does not have significant foreign exposure, especially when domestic loan growth is expected to slow down.”
“If the BII deal fails, Maybank has to fall back on its small existing operations in Indonesia where it has only two to three branches. Given the stance that BNM has taken on potential losses in the BII investment, Maybank is likely to refrain from acquiring stakes in other major Indonesian banks, most of which are listed,” CIMB said.
Meanwhile, Reuters reported Temasek as saying that Maybank had not provided any update on the latter’s planned purchase of BII. “As far as we are aware, all conditions have been fulfilled for the transaction to complete on July 31,” Tow Heng Tan, a director at Fullerton, said in a statement.
“We are in consultation with our co-investment partner, Kookmin Bank, and we will be seeking clarification from Maybank,” he added. Maybank’s share price closed 40 sen higher at RM7.90 yesterday.
by Sharmila Ganapathy
