BT, Published February 9, 2006
Southern Bank ends merger talks with CIMB

Malaysian lender says no formal offer after three months of negotiations

(KUALA LUMPUR) Malaysia's second-smallest lender, Southern Bank Bhd, said yesterday it had decided to end merger talks with rival CIMB Group, which had made no formal offer after nearly three months of negotiations. CIMB, the flagship of Malaysia's second-largest lender, Bumiputra-Commerce Holdings Bhd, had been seeking medium-sized Southern for its retail expertise and reach.

Within minutes of Southern's announcement, Bumiputra-Commerce vowed to continue its merger talks with Southern shareholders. 'While Bumiputra-Commerce is disappointed with the unilateral decision of Southern Bank's board, Bumiputra-Commerce intends to continue discussions with shareholders of Southern Bank who remain interested in a merger . . . ,' it told the stock exchange.

Earlier, Southern said it had not received a formal merger offer despite nearly three months of talks. 'After an extensive period of negotiations of almost three months, Southern Bank has not received from CIMB Group a formal offer of the price, structure and value proposition relating to the proposed merger,' it said. 'The board is of the view that further prolonged discussions would not be in the best interests of Southern Bank and its shareholders and other stakeholders, including its customers,' it told the stock exchange in a statement. Southern said it would immediately seek a near-term merger alternative that was in the best interests of its shareholders and stakeholders.

The Malaysian government wants the country's 10 banking groups to further consolidate ahead of a planned financial sector liberalisation next year that will open the industry to further competition from global banks such as Citigroup Inc.

On Jan 28, Southern said it had received no formal merger offer from CIMB, although hopes for the acquisition to proceed had briefly brightened following the former's decision to drop plans to buy Singapore insurer Asia General Holdings, which had been seen as making a takeover bid for Southern costlier.

Shares of Southern ended yesterday down 2.45 per cent at RM3.98 before the news, while Bumiputra-Commerce ended flat at RM5.80. Shares of Killinghall (Malaysia) Bhd, a controlling shareholder in Southern, closed down 0.5 per cent at RM3.78. - Reuters

Extracted from Business Times Published November 4, 2005

Southern Bank steps up share buybacks

Move seen in response to looming hostile takeover

(KUALA LUMPUR) Southern Bank Bhd (SBB) - Malaysia's second smallest bank, which is being coveted by Bumiputra-Commerce Holdings Bhd (BCHB) - appears to be taking precautionary moves in the face of a looming takeover, Malaysia's Business Times quoted market sources as saying.
Mr Tan: Has long made known his intention to keep the bank independent

The bank has actively been buying back its shares since June 29, and has been a little more aggressive at it of late, a move some dealers say is partly to defend itself against a potential takeover as much as it is to support its share price.

Its share price on Wednesday edged up 18 sen further to RM4.20 (S$1.90) on 3.8 million shares - its highest close in almost six years - after it bought back 1.47 million shares for RM6 million (or between RM4 and RM4.20 each).

On Monday, a buyback of 1.73 million shares for RM6.84 million (between RM3.90 and RM4.02 a share) had sent SBB's price spiralling to RM4.02. The buyback had constituted slightly more than half of SBB's transacted volume that day.

The strong interest on Wednesday was also seen in SBB-related counters. SBB foreign gained 12 sen to RM3.92 on more than double the previous trading day's volume, and its warrants also went up 12 sen to RM2.24.

SBB had accumulated at least 24.89 million of its own shares by end-August and had kept up the active buyback. It is allowed to buy back up to 145 million shares, or 10 per cent of the company.

Being the clean and lean entity that it is, albeit small, SBB knew from way back that it would be a target for bigger banks, analysts said.

But SBB chief executive and substantial shareholder Tan Teong Hean has long made known his intention to keep the bank independent.

However, two other major shareholders - the Sultan of Selangor and Syed Mohd Yusof Syed Nasir - appear to have different ideas and are currently negotiating to sell their stakes to BCHB.

SBB's share buyback started less than a month after the bank announced that it had won a bid to buy Singapore's Asia General Holdings Ltd for $918.8 million - the deal that subsequently highlighted the major shareholders' differing ambitions for the bank.

'The difference between then and now is that major shareholders then were unanimous in their decision-making . . . now there's more of a tug-of-war,' remarked the chief investment officer at a fund management firm.

Meanwhile, Mr Tan's wife, Lim Siew Lay, has been increasing her stake in the bank's single largest shareholder, Killinghall (Malaysia) Bhd.

'It looks like Tan and his family are consolidating their position. Don't forget, whoever controls Killinghall essentially controls the bank,' observed SJ Securities research head Wee Kim Hong.

Killinghall, which has a 16.8 per cent stake in the bank, rose sharply to RM3.46 yesterday, up 14 sen.

Ms Lim last bought 1.15 million shares on Oct 27, raising her stake in Killinghall to 7.55 per cent. She now holds 14.38 million shares.

Ms Lim had also acquired 267,400 irredeemable convertible unsecured loan stocks at RM1 each.

'This move could be interpreted as either a defensive one or opportunistic, where Lim is buying ahead of a potential bid from BCHB,' Macquarie Research said in a note to clients.

On Monday, stock market filings showed that six million Killinghall shares were traded off-market at RM3.30 each, but the names of the buyer and the seller were not disclosed.

Commerce Asset changes name

COMMERCE Asset-Holding Bhd said yesterday it was changing its name to Bumiputra-Commerce Holdings Bhd with immediate effect. In a statement, it added that the stock name and code would remain the same. – AFX-Asia    

Extract fm The Star,

Saturday October 22, 2005

CAHB and SBB to start merger talks

THE Commerce Asset-Holding Bhd (CAHB) group yesterday announced it has obtained Bank Negara's approval to start merger discussions with shareholders of Southern Bank Bhd (SBB). 

CAHB told Bursa Malaysia it will begin discussions with Sultan of Selangor Sultan Sharafuddin Idris Shah, Datuk Syed Mohd Yusof Syed Nasir and other shareholders of SBB for a possible merger of the businesses.  “For financial institutions, Bank Negara's approval is required before any negotiations can commence. This is therefore, only the first step. We expect to meet SBB shareholders soon and we will move on from there,'' said Datuk Nazir Razak, group chief executive of CIMB and chairman of the CIMB-Bumiputra Commerce Bank (BCB) executive committee in a statement yesterday. 

CAHB had announced a corporate restructuring exercise involving CAHB, CIMB and BCB, which would result in the creation of the new CIMB banking group. The exercise is expected to be completed by the end of the year. “The move to explore a merger with SBB is consistent with our strategy of being proactive in banking consolidation to strengthen ourselves to compete post further liberalisation and deregulation of the Malaysian market. Preparing for further consolidation was one of the primary objectives of the CIMB-BCB integration,'' said Nazir. “We think that SBB would complement our existing businesses very well. They have good mass affluent retail and SME franchises while we are strong in treasury, corporate and investment banking. “We are optimistic about the potential combination of management talent. Our customer bases are also quite different while our two asset management companies could combine to become the largest domestic private asset manager,'' he added. Nazir said although the negotiation process would bring a temporary element of uncertainty for its shareholders, the group would only conclude a deal that could convincingly add to shareholders' value. 

Analysts say that should a merger materialise, it would bolster CAHB's position as the country's second largest bank in terms of assets and fill some of the “holes” in the CAHB banking group. CAHB's strength is in commercial and investment banking. The group has a growing asset management business but it is still considered weak in some areas such as SMEs and the credit card business.  Analysts say a merger with SBB would allow it to not only bolster its consumer banking arm, but also gain significant inroads in asset management, SME banking business and credit cards. Any successful negotiation that would lead to a merger would, however, depend on whether all the main shareholders are in agreement, say analysts. 

Sultan Sharafuddin Idris Shah and Syed Yusof own nearly 28% of SBB's stock and should they, along with other identified shareholders, agree to sell their shares to CAHB, CAHB could very well have to make a general offer for the remaining shares in SBB. SBB chief executive director Tan Sri Tan Teong Hean, however, in a recent report, had spoken about the bank's appetite for growth and acquisition. He said talk of SBB being acquired showed that the bank was doing something right and was a mark of success. In the event talks are successful and a merger is undertaken, analysts feel that the CAHB group has the financial muscle to fund a general offer for SBB shares. 

CAHB, which closed up 10 sen at RM5.75 yesterday, has a market capitalisation of RM15.8bil while SBB's market capitalisation is RM5.26bil. Whether the deal is all cash, shares or a combination of both, would depend on what the major shareholders of SBB want, say analysts. 

Analysts also feel that integration would not be an issue between CAHB and SBB. CAHB and CIMB are only merging their corporate and treasury businesses and should not create a problem in the event it has to mesh with other significant businesses.