Malaysia leans to Kuwaiti bank in RHB bid battle

Kuwait Finance House, as leader of a consortium of foreign and local investors, had been battling with a rival bidder, local lender EON Capital Bhd, for control of RHB, but events on Thursday seemed to swing firmly in favour of the consortium.

Malaysia’s state pension fund snatched control of RHB’s parent firm on Thursday, buying another third of the company and putting it in position to block EON Capital’s $3.4 billion bid for the entire group, comprising parent Rashid Hussain Bhd and banking unit RHB Capital Bhd.

In elbowing EON Capital out of the way, the pension fund did not say whether it was acting in concert with Kuwait Finance House, but the Kuwaiti bank left little room for doubt later in the day, when it issued a statement welcoming the fund’s move.

“Subject to regulatory approvals, the consortium is confident that it would have a role to play in this new development, to create the world’s largest, most innovative and respected global Islamic bank,” it said.

“The consortium would like to thank all parties including (central bank) Bank Negara Malaysia, the Ministry of Finance and other parties for their support,” it added.

Malaysia wants to become a global hub for Islamic finance, and the central bank chief recently told Reuters she would welcome the emergence of a global Islamic bank here. Malaysia is already home to the world’s largest Islamic bond market.

EPF: long-term investor

The Employees Provident Fund (EPF) already owned about 30 percent of Rashid Hussain before it emerged that it was buying another 33 percent from Utama Banking Group Bhd, whose owners have political connections to the ruling coalition.

Utama said in a statement it had agreed to sell its Rashid Hussain stake to the fund for 1.80 ringgit a share, below EON Capital’s offer price of 1.97 ringgit.

Rashid Hussain controls RHB Capital, which in turn owns 70 percent of RHB Bank, holder of the banking licence. State investment arm Khazanah Nasional owns the rest of the bank.

The fund’s purchase of Utama’s stake is set to trigger a general offer by the fund for the rest of Rashid Hussain as well as RHB Capital, for which it would bid 4.80 ringgit per share, also below EON Capital’s bid of 5 ringgit.

The fund said in a statement on Thursday night it was a long-term investor in RHB and would appoint professional managers to run it, but said nothing about the Kuwaiti bank’s consortium.

Overall, the fund’s offers value RHB group at 12.73 billion ringgit ($3.63 billion), while EON Capital’s bids put it at 13.38 billion ringgit. Kuwait Finance House has not made a bid for the whole group but says it could invest up to $4 billion to turn its plans for RHB into reality.

Rashid Hussain shares last traded at 1.90 ringgit and RHB Capital shares at 4.76 ringgit. Both were suspended from trade.

The offer from EON Capital, Malaysia’s seventh-largest local bank, values RHB Capital shares at almost twice book value, according to Reuters data -- at the top end of recent Malaysian bank acquisitions, broker Aseambankers said on Thursday.

Singapore’s Oversea-Chinese Banking Corp. fetches just short of 2.2 times book value. The two biggest Malaysian banks, Bumiputra-Commerce Holdings Bhd and Malayan Banking Bhd, fetch about 3 times, Reuters data shows.

Rashid is heavily indebted and needs an infusion of equity to safeguard its future. It has total debts of about 3.5 billion ringgit, including a bond repayment of $265 million due in June.