Malayan Banking has struck a deal to buy 44.6% of the equity of Kim Eng Holdings, a stock broker with a leading position in Singapore, Thailand, Indonesia and the Philippines, at a price which represents an equity value of S$1.79 billion ($1.4 billion) for 100% of Kim Eng.
Malayan Banking, or Maybank, will pay S$798 million for the 44.6% stake it is acquiring at the first stage, translating to a per share price of S$3.10. It is acquiring the shares from Ronald Anthony Ooi Thean Yat who owns 15.4%, and Yuanta Securities Asia Financial Services which owns 29.2%.
The price was agreed on a negotiated basis between the parties, said sources. It has been known for some time that Taiwan-based firm Yuanta is willing to exit its investment in Singapore-based Kim Eng as it seeks to enhance focus on Greater China.
The price of S$3.10 represents a 15% premium to the last traded price per share of Kim Eng on January 5, the day before the deal was announced. It represents an 18% premium to the volume weighted-average price (VWAP) on the Singapore Exchange (SGX) for five days prior to the announcement and a 33% premium to the VWAP for the last three months. On a book value basis, S$3.10 is 1.91 times Kim Eng’s book value as of September 30 last year.
Once the acquisition from the two controlling shareholders is closed successfully, Maybank will launch a mandatory general offer to the minority shareholders of Kim Eng at the same price of S$3.10. Including the money being shelled out to the two controlling shareholders, Maybank’s total outlay will be S$1.79 billion. Maybank intends to privatise Kim Eng if it is successful in cornering the minority shares outstanding.
Kim Eng's current chairman and chief executive officer Ronald Ooi, who took over as chairman and CEO in 2008, has agreed to continue at Kim Eng for at least three years after the deal, as have other key management, said a source.
Mitsubishi UFJ Securities owns 29% of Kim Eng as a result of a strategic alliance struck between the two firms in early 2008. The rest of the shareholding of Kim Eng is widely dispersed and the shares are fairly illiquid, the source added.
Acquisition of 100% of Kim Eng will cost Maybank S$1.79 billion. Maybank will fund the deal from cash on its balance sheet in the first instance, said sources, but could raise capital subsequently.
Kim Eng is a stock broker with a top five position in Singapore, Thailand, Indonesia and the Philippines. It also has offices in Hong Kong, London and New York.
The proposed transaction is an opportunity for Maybank to accelerate its vision to become a regional financial services leader in Southeast Asia, Maybank said in a Bursa Malaysia filing. It is consistent with its strategy of developing its pan-Asean financial services platform, and accelerates the build-out of its investment banking and equities platform in the region, the Kuala Lumpur-based bank added. Datamonitor also makes the point that the deal will give "Maybank definite advantages in the wholesale banking market [and] also will give it a key asset in the regional wealth management market as well". This is because direct equity investments are a key draw for affluent clients in the markets in which Maybank is strengthening its brokerage capabilities.
The takeover is subject to approval from Bank Negara Malaysia and the Monetary Authority of Singapore.
Analysts were generally positive on the move, saying it was a big step towards giving Maybank a foothold in a number of markets which are synergistic with its ambitions. Maybank has a stated aim of deriving 40% of its profits from markets other than Malaysia. For Kim Eng, being owned by a commercial bank provides access to both capital as well as a client base.
Nomura and Maybank investment banking worked with Maybank on the buy side.