Abu Dhabi fund sells part of RHB stake at a big loss

In a rare deal in Malaysia’s subdued secondary market, sovereign wealth fund Mubadala Investment trimmed its stake in RHB through a $149 million block trade.

One of Abu Dhabi’s sovereign wealth funds raised M$610 million ($149 million) after the market close on Tuesday by selling sale of a small stake in RHB Bank in what is only the second international follow-on offering out of Malaysia so far this year.

With only $732 million-worth of follow-on deals completed year-to-date, Malaysia looks set to record the lowest volume in secondary share sales since 2006, according to Dealogic. That is in sharp contrast to the robust activity of the last few years when at least $3 billion-worth of shares changed hands this way each year.

The shrinkage in secondary Malaysian offerings also contrasts, to an extent, with the performance of the local stock market, which at times this year has been strong. The FTSE Bursa Malaysia Index was up as much as 7.6% in April when it almost touched a five-year high, before correcting sharply in late June, leaving it broadly where it began the year. 

Malaysia's primary public-equity market is struggling as well. Total proceeds from initial public offerings have been a mere $130 million year-to-date – the lowest since 1998 – and that figure is unlikely to rise much in the near term since there are no large deals in the pipeline.

Mubadala Investment, one of Abu Dhabi’s three sovereign wealth funds, presented event-driven funds with a rare opportunity to build up a position in Malaysian equities when it offered 120.3 million shares in RHB Bank to international investors through a block trade.

The sovereign fund pitched the shares – equivalent to 3% of RHB’s existing share capital – at an initial guidance price of M$5.07 to M$5.18 per share, representing a discount of 3% to 5.06% to the stock’s M$5.34 Tuesday close. Final pricing was fixed at the bottom of the guidance.

As it stands, the trade is the only internationally marketed follow-on offering from Malaysia this year besides property developer SP Setia’s $257 million share sale in January. It was also the only Reg S/144A trade this year.

Still, one piece of positive news for Malaysia-focused investment bankers is that this is unlikely to be the last sale by Mubadala Investment, which inherited 17.8% of RHB after merging with government-owned International Petroleum Investment Company (IPIC). 

As such, RHB is not a core Mubadala Investment holding. Indeed, local media have reported that the sovereign fund plans to offload the entire stake after conducting a portfolio review post-merger.

Any further sale, though, is at least two months away since the fund has agreed on a 60-day lockup for the remaining shares.


IPIC purchased the RHB stake in 2008 from government-owned Abu Dhabi Commercial Bank at M$10.8 per share. This suggests Mubadala Investment, which remains RHB’s second-largest shareholder with a 14.8% interest, made a 53% loss on the shares it sold on Tuesday.

According to sources familiar with the matter, IPIC was one of the main parties that objected to the three-way merger between RHB, CIMB and Malaysia Building Society in 2015, claiming the offer price was not high enough.

Intriguingly, it would have made a much smaller loss if it had accepted the merger since it would have exited at about M$10.03 per share based on the share-swap ratio between the three lenders.

CIMB and JP Morgan were joint bookrunners on Mubadala Investment's share sale.

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