RHBCap-OSK merger believed to have received Bank Negara approval

PETALING JAYA: The RHB Capital Bhd-OSK Holdings Bhd merger deal is believed to have received the nod from Bank Negara and is now awaiting approval at the Finance Ministry level, according to sources.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/4/27/business/11186098&sec=business
Published: April 27, 2012

“It will probably take another two to three weeks before an announcement is made,'' an analyst told StarBiz.

While most analysts had expected this nod, some industry players expressed surprise that the issues that were said to have held up the approval process could be resolved so fast.

“The market and industry have to make up their minds,'' said an observer. “One moment, they say the authorities are dragging their feet. The next moment, they question why was the process so fast.''

Among the issues apparently are those related to pricing; talk that CIMB is still interested in RHB, hence the rationale for RHB buying OSK; and that most department heads proposed for the investment bank are purportedly from OSK.

“At a pricing of close to two times book value, the goodwill incurred for taking over OSK could be around RM1bil,'' said an industry player.

At at Dec 31, 2011, OSK group shareholders' fund stood at RM1.041bil.

“That would be a lot to pay if it is indeed true that RHB could be taken over by CIMB.''

Also, this is regarded to be a complex deal that will see RHBCap's reach extended to markets like Indonesia, Cambodia, Hong Kong and China.

RHBCap and OSK had, as far back as Jan 11, applied for the central bank's approval for their merger.

Internally, RHB has set a target for the completion of the deal at the end of the third quarter.

Analysts said no doubt, this was a merger and acquisition story, but there could be a knee-jerk reaction on earnings at RHB, depending on the price paid for OSK. “As long as the valuation is not significant, the deal would be neutral to positive,'' said an analyst.

The regional footprint that RHB gains from this deal will be significant especially when it has had little success so far, with its acquisition of PT Bank Mestika dependant on changing bank rules in Indonesia.

“Investment banking operations in RHB have been quiet they have lost quite a few people who have not yet been replaced,'' said another analyst.

“This deal helps them get some replacements.''

With RHB mostly in institutional business and OSK in the mid-sized and commercial sector, there appears to be little overlap between the two.