RHBCAP ... Apr13

Representatives of the EPF and Middle East based Aabar Investmnets are scheduled to meet in the next two weeks from 15 April 2013 matters relating to RHB Cap. These include a potential restructuring exercise that may bring about a privatization.

Pricing and valuation are key and is likely to be one of the topics discussed when they meet.

Should there be a decision to privatize the banking group, Aabar’s buy in is crucial given its large stake in the group.

Meanwhile OSK Holdings Bhd is open to the corporate restructuring plan.

Aabar currently (April 2013) has a 22% stake in RHB Cap. Its stake was diluted from 25% following the acquisition of OSK Investments Bank Bhd which was paid for with 245 million new RHB Cap shares worth rm7.36 each and em147.5 million cash. The EPF is the single largest shareholder of RHB Cap with a 41% stake while OSK has 9.8%.

It is believed Aabar’s high entry price – at more than rm10 per share – could pose a stumbling block to a restructuring of RHB Cap that could involve a privatization. However market observers opine that any privatization offer of RHB Cap now (April 2013) would likely not cross the rm10 mark.

For example, Should RHB Cap be privatized at rm9.00 per share, that would translate into a valuation of 1.48 times price to book. The book value of RHB Cap stood at rm6.06 as at Dec 2012.

To recap, Aabar paid rm10.80 per share in June 2011 for ADCB’s 25% in RHB cap. The rm10.80 per share deterred Maybank and CIMB from launching a takeover of the RHB group. ADCB’s intention to hive off its stake in 2011 was perceived to be one of the catalysts for a merger of RHB Cap with other banking group.

Earlier it was reported that a proposal to restructure RHB Cap in an exercise that will lead to its privatization in an effort to create better value and improve tax efficiency. The extensive proposal included the option for RHB Bank to be relisted later. The banking group could also be enlarged with the subsequent injection of MBSB.

The timing of the restructuring and whether ther major shareholders of the group – which includes the EPF – are agreeable to the proposal, remain unknown.