Who should EPF choose - Maybank or CIMB?

Written by Chris Ng

There is no right or wrong answer to this question. Of course, the rule of thumb, the winner should technically be the highest bidder.

Let's ignore the pricing consideration for the moment, let's look at another perspective - the ultimate shareholding of the combined entity.

The facts are as follows:

- CIMB is owned by Khazanah Nasional Berhad (KNB) - 28.6% & EPF (12.4%) shareholding (market cap: USD20.6 billion)

- Maybank is owned by PNB (including its funds) - 56% & EPF (11.02%) (market cap: USD22.1 billion)

- RHB is owned by EPF - 45%, PNB - 3.6% shareholding (market cap: USD6.7 billion)

- Let's assume purchase consideration for the takeover is priced at current market value of RHB.

- Let also assume (for simplicity) - no rights issue by the acquiring bank

- Let's also also assume (for simplicity) that the transaction is satisfied purely by issuance of equity (no cash) by the acquiring bank

Source : The Star Online

Scenario A - Maybank takeovers RHB

The expected shareholding structure of the merged entity, Maybank-RHB:

a. PNB = (56.7% x 22.1 + 3.6% x 6.7) / (22.1+ 6.7) = 44%

b. EPF = (11.02% 22.1 + 45% x 6.7) / (22.1+ 6.7) = 19%

Scenario B - CIMB takeovers RHB

The expected shareholding structure of the merged entity, CIMB-RHB:

a. Khazanah - (28.6% x 20.6) / (20.6 + 6.7) = 22%

b. EPF - (12.4% x 20.6 + 45% x 6.7) / (20.6 + 6.7) = 20%

Our Final Thoughts

- If I am EPF, I will give serious thoughts for CIMB to takeover RHB, as I am controlling a strategic stake of 20%, which is just marginally lower than Khazanah's shareholding. As such, if I am EPF, I can still exert control over the merged entity through both shareholding and board representation.

- In contrast, if Maybank is to takeover RHB, as EPF, I will not be able to exert much control, as my shareholding stake in the merged entity is significantly below that of PNB.

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