RHBCAP ... Apr11

The likelihood of Abu Dhabi Commercial Bank (ADCB) exiting from RHB Capital Bhd, a deal that has been widely speculated over the past few months, will put the latter in the spotlight over the next few months.

RHBCap director Tan Sri Azlan Zainol said it has not been officially informed by Abu Dhabi Commercial Bank (ADCB), which owns a 25% stake, of the latter's intention to exit the banking group. ADCB has not written to RHBCap on its plan to exit, and hence, RHBCap was unclear on the status of that development.

Azlan also said RHBCap was open to merger talks “anytime” but it is currently not involved in discussions with AMMB Holdings Bhd. However, the banking group was ready for talks with any interested parties.

Abu Dhabi Commercial Bank ADCB.AD’s CEO said it had hired Goldman Sachs and BOA-Merrill Lynch as advisors. A firm decision on the sale of the stake, valued at $1.4 billion, had yet to be made.

The EPF, a major shareholder of RHB Capital Bhd, said it is open to merger proposals for the bank if it adds value to shareholders. It is currently not in talks with any parties and right now, there is no opportunity for a merger. The EPF owns a 45 per cent stake in RHB, Malaysia’s fourth-largest bank by assets. The EPF also said it is not true it has been approached to consider a merger between RHB and AMMB Holdings Bhd.

Industry observers say if ADCB planned to sell its stake in RHB Capital, the ideal new shareholder would be another banking group that would add value to RHB Capital’s operations and expansion plans. But the 25% stake could also be spread out to a few potential buyers.

Meanwhile RHB Cap is seeking a further extension of six months until Oct 19 2011 to complete a proposed rights issue that would raise some RM1.3 billion cash via the issuance of new shares.

The proceeds from the cash call, which was proposed in October 2009, were to finance RHB Cap’s proposed acquisition of up to 89% equity interest in Indonesia-based PT Bank Mestika Dharma for about RM1.3 billion. It expects the acquisition of Indonesia's Bank Mestika to be completed in the third quarter of 2011.

This is the second extension that RHB Cap has sought from the stock exchange. The delay in the implementation of the rights issue added credence to speculation that the banking group is poised to see some changes in its shareholding and structure to complete the buyout of Bank Mestika Dharma.

It is worth noting that it has already been 15 months since the proposed acquisition was announced. BNM had given its conditional go-ahead for RHB Cap’s proposed acquisition three months after the announcement of the deal. However, RHB Cap has yet to announce the approval from the Indonesian authorities. The group said it will have to go through the Bank of Indonesia’s “fit and proper” test.

Previously, speculated that the delay in making the cash call could be because of the long-awaited approval of the proposed takeover from the Indonesian authorities. But lately, the delay has also been attributed to changes in RHB Cap’s shareholding.

Earlier it was reported that RHB Cap’s single largest foreign shareholder, Abu Dhabi Commercial Bank (ADCB), was in the process of hiring investment banks to handle the sale of its 25% in the banking group.

ADCB acquired a 25% block in RHB Cap from the Employees Provident Fund (EPF) in 2008 at RM7.20 per share, a 50% premium to RHB Cap’s trading price of RM4.80 at that time. The transaction valued the banking group at 2.2 times price-to-book, a price that was in line with banking transactions at that time.

A question often asked is who would be the purchaser of ADCB’s block in RHB Cap, the fourth largest banking institution in the country. It has reported that AMMB Holdings Bhd is rumoured to be a potential merger candidate with RHB Bank Bhd. AMMB has the Australia and New Zealand Bank as one of its major shareholders while the other is Tan Sri Azman Hashim.

Some industry observers noted that a rights issue at this juncture would complicate matters as BNM has ruled that the EPF can only subscribe to 45% of the rights portion. Considering that ADCB is looking to exit, it would not likely subscribe for its portion, which would complicate matters.

Hence, the group would have to wait for things to settle before the implementation of the rights issue and completion of its acquisition of Bank Mestika Dharma.