EON Capital says yes to Hong Leong
EON Capital Bhd (EONCap) has accepted a RM5.06 billion takeover offer from its larger rival Hong Leong Bank Bhd, a move that will create the country's fourth largest banking group by assets.
It did this on Thursday, after the High Court dismissed a lawsuit taken by EONCap's largest shareholder, Hong Kong-based Primus Pacific Partners, to prevent the takeover.
"The board of directors ... signed and delivered their acceptance of the offer," EONCap told Bursa Malaysia yesterday.
It also said Hong Leong had agreed to its last-minute request to let EON Bank Bhd, its wholly-owned banking unit, pay out a net interim dividend amounting to RM311.9 million.
The dividend, which works out to 45 sen a share, will not be deducted from Hong Leong's offer price of RM7.30 a share for EONCap's assets and liabilities. It will also not form part of the assets to be taken up by Hong Leong.
While EONCap has not explicitly said what it intends to do with the dividend it receives from EON Bank, analysts expect it to eventually pay it out to all its shareholders.
This would indirectly raise the offer price for EONCap to RM7.75 a share.
"The additional 45 sen a share sweetens the deal somewhat for shareholders, especially minorities, after waiting so long for it to be concluded," said Lim Sue Lin, a banking analyst at HwangDBS Vickers Research.
EONCap chairman Gooi Hoe Soon said the dividend was secured after much negotiation with Hong Leong. "We're pleased with the result," he said, adding that the directors intended to manage the transaction in a "fair and equitable" manner to all parties concerned.
The proposed dividend is still subject to Bank Negara Malaysia's (BNM) approval. EONCap will also be making an application to the Securities Commission (SC) for a proposed change in control of its investment bank, MIMB Investment Bank Bhd.
"The parties shall complete the transaction" once the BNM and SC approvals have been obtained, EONCap said.
It remains to be seen whether Primus, a private equity firm, will make any further moves to block the deal. Its lawyers have said they intend to file an appeal against the court's decision.
"It is only after the court rules on the appeal can the deal come to completion. The interim dividend is positive as it is not excessive and yet is sufficient to increase the probability of bringing the merger to a close," OSK Research said in a note to clients yesterday.
Primus, who objected to the deal on grounds that the RM7.30 a share offer was too low and not in the company's best interest, stands to make a loss on its investment if it goes through. The offer is 31 per cent lower than the RM9.55 a share it paid for its 20.2 per cent stake in 2008.
Analysts nevertheless expect the deal to go through. "With the approval from the board, we now expect the takeover to proceed," said one from AmResearch Sdn Bhd.
The takeover has turned out to be a long-drawn affair, at over a year, the longest ever in the Malaysian banking sector. Hong Leong first showed formal interest in EONCap in December 2009. It made its current offer in April last year, improving on an earlier RM4.9 billion deal.
Shares of Hong Leong and EONCap were suspended from trading in the stock market yesterday to allow for them to make their announcements on the deal. They were last traded at RM10.40 and RM7.23, respectively.
OSK said it expects EONCap's share price to trade upwards to just under RM7.75 to reflect the dividend. HwangDBS' Lim said shareholders should use the takeover proceeds to re-invest in Hong Leong to ride on the upside of the enlarged entity, which will now have assets of over RM140 billion. She has a "buy" call on Hong Leong's stock, with a target price of RM11.80.
It did this on Thursday, after the High Court dismissed a lawsuit taken by EONCap's largest shareholder, Hong Kong-based Primus Pacific Partners, to prevent the takeover.
It also said Hong Leong had agreed to its last-minute request to let EON Bank Bhd, its wholly-owned banking unit, pay out a net interim dividend amounting to RM311.9 million.
The dividend, which works out to 45 sen a share, will not be deducted from Hong Leong's offer price of RM7.30 a share for EONCap's assets and liabilities. It will also not form part of the assets to be taken up by Hong Leong.
While EONCap has not explicitly said what it intends to do with the dividend it receives from EON Bank, analysts expect it to eventually pay it out to all its shareholders.
This would indirectly raise the offer price for EONCap to RM7.75 a share.
"The additional 45 sen a share sweetens the deal somewhat for shareholders, especially minorities, after waiting so long for it to be concluded," said Lim Sue Lin, a banking analyst at HwangDBS Vickers Research.
EONCap chairman Gooi Hoe Soon said the dividend was secured after much negotiation with Hong Leong. "We're pleased with the result," he said, adding that the directors intended to manage the transaction in a "fair and equitable" manner to all parties concerned.
The proposed dividend is still subject to Bank Negara Malaysia's (BNM) approval. EONCap will also be making an application to the Securities Commission (SC) for a proposed change in control of its investment bank, MIMB Investment Bank Bhd.
"The parties shall complete the transaction" once the BNM and SC approvals have been obtained, EONCap said.
It remains to be seen whether Primus, a private equity firm, will make any further moves to block the deal. Its lawyers have said they intend to file an appeal against the court's decision.
"It is only after the court rules on the appeal can the deal come to completion. The interim dividend is positive as it is not excessive and yet is sufficient to increase the probability of bringing the merger to a close," OSK Research said in a note to clients yesterday.
Primus, who objected to the deal on grounds that the RM7.30 a share offer was too low and not in the company's best interest, stands to make a loss on its investment if it goes through. The offer is 31 per cent lower than the RM9.55 a share it paid for its 20.2 per cent stake in 2008.
Analysts nevertheless expect the deal to go through. "With the approval from the board, we now expect the takeover to proceed," said one from AmResearch Sdn Bhd.
The takeover has turned out to be a long-drawn affair, at over a year, the longest ever in the Malaysian banking sector. Hong Leong first showed formal interest in EONCap in December 2009. It made its current offer in April last year, improving on an earlier RM4.9 billion deal.
Shares of Hong Leong and EONCap were suspended from trading in the stock market yesterday to allow for them to make their announcements on the deal. They were last traded at RM10.40 and RM7.23, respectively.
OSK said it expects EONCap's share price to trade upwards to just under RM7.75 to reflect the dividend. HwangDBS' Lim said shareholders should use the takeover proceeds to re-invest in Hong Leong to ride on the upside of the enlarged entity, which will now have assets of over RM140 billion. She has a "buy" call on Hong Leong's stock, with a target price of RM11.80.
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