Rabu, 20 Januari 2010

Hong Leong to walk away if EONCap bidding war starts?

Date:20 Jan 2010

Analysts say they still believe Hong Leong Bank will not overpay for an acquisition and it can walk away from the deal at no loss to itself

Hong Leong Bank Bhd (5819) may walk away from the takeover of smaller rival EON Capital Bhd (EONCap) if a bidding war erupts or the talks drag on too long, analysts say.

"We still believe Hong Leong will not overpay for an acquisition. If the price is excessive, (it) can walk away from the deal at no loss to itself," HwangDBS Vickers Research wrote in a report early yesterday after EONCap said it was asking for the regulator's consent to start talks with potential third parties.

The approval that EONCap has asked for also covers the option to buy other rivals.

However, Bank Negara Malaysia, in a response yesterday, only gave it the green light to start merger talks with Hong Leong, which had earlier been given the approval.
EONCap is opening the door for bidding, analysts said, and this may push up its share price if there are competing bids.

Besides Hong Leong, Business Times learnt that EONCap has submitted to the central bank the names of at least two other parties that it plans to talk to.

Alliance Financial Group Bhd, the smallest lender in the country in which Singapore's Temasek Holdings owns 29 per cent share, is one name being bandied about.

"Alliance is weaker in the car loan segment where EONCap is strong, while EONCap is weaker in the mortgage business where Alliance has an edge," a banking analyst said, pointing to the potential synergy that the two smaller banks would have.

Alliance, whose chief is on leave pending an internal probe, may also be on the lookout for options, observed others.

Still, the top three Malaysian banks - Malayan Banking Bhd, CIMB Group Bhd and Public Bank Bhd - have all made successful ventures overseas and are unlikely to be interested in EONCap.

Affin Holdings Bhd, although it is the second smallest local bank and may be vulnerable to stiffer competition, has a strong shareholder in the Armed Forces Fund, which is probably not keen to give up control.

This would leave RHB Capital Bhd and AMMB Holdings Bhd, currently the fourth and fifth largest banks by assets.

RHB Capital is at risk of losing the number four spot to a combined Hong Leong-EONCap if the deal goes through. RHB, which aspires to be one of the top banks in the region, may need greater scale locally, observers pointed out.

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