230222417 Hong Leong Bank and EON Bank PDF

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Hong Leong Bank and EON Bank-Takeover: Chronology 05/01/2010

EON Capital's Fortunes In The Coming Weeks Business Times, SINGAPORE, Jan 5 — Doubts are surfacing over a possible merger between Hong Leong Bank and EON Bank that would create Malaysia’s fourth-largest bank with assets of RM110.5 billion. In late December, Hong Leong Bank, which is controlled by the reclusive tycoon Quek Leng Chan, told the stock exchange that it had received Bank Negara Malaysia’s permission to start negotiations with “certain shareholders” of EON Capital to acquire an interest in its smaller rival. Listed EON Capital wholly owns EON Bank. EON Capital’s largest shareholders are businessman Rin Kei Mei and Sarawak billionaire Tiong Hiew Khiing, who collectively hold 33.2 per cent of the financial firm. Other shareholders include Hong Kongbased investment fund Primus Pacific Partners (20.2 per cent), the Employees Provident Fund (12.1 per cent) and state investment agency Khazanah Nasional (10 per cent). The sticking point could be price. Local news reports, citing sources, have said that Quek would be willing to pay between RM5.50 and RM6 per EON Capital share, which would value the bank at one-1.2 times book. “A previous attempt several years ago stalled over pricing: Mr Quek is not known to pay more than what he considers fair.’ But officials familiar with Rin and Tiong said that they would expect at least RM8-8.20 a share, which would value the bank at almost 1.6 times book. There is no certainty that a deal will be struck, as this is not the first time Hong Leong Bank has eyed EON Capital. A previous attempt several years ago stalled over pricing: Quek is not known to pay more than what he considers fair. So far, nothing has happened as Quek is said to be abroad. The Star newspaper, citing sources, said yesterday that the Employees Provident Fund and Khazanah are ‘believed’ to have exited from EON Capital. But a government official denied this. “We haven’t received any offer so far,” he told BT. It is also not clear where Primus would stand. Three years ago, the investment fund bought into EON Capital for a hefty RM9.55 apiece – a price Quek would probably consider astronomical. And the opposite could be said about Quek’s speculated buying price — RM5.50-6 — as far as Primus is concerned. Indeed, there is talk that Primus is approaching other funds to make a rival bid for EON Capital. According to The Star, the fund approached Singapore’s Temasek Holdings. In theory, this makes sense. Temasek manages Malaysia’s smallest bank, Alliance, so aligning with Primus could pave the ground for an ultimate merger between EON Bank and Alliance Bank. But the Singapore investment agency has not commented publicly on The Star’s story.

26/04/2010

What is clear is that Malaysia’s central bank would encourage a merger. Indeed, the move towards a possible merger reflects Bank Negara’s wish to winnow the Malaysian banking sector to a few large banks, to better withstand increased foreign competition starting this year. Malaysia now has eight local banks. — Business Times Singapore EONCap acquisition – no share option HONG Leong Bank Bhd (5819) has submitted its improved RM5.06 billion all-cash bid for EON Capital Bhd (EONCap) to Bank Negara Malaysia and shareholders of both banks are set to vote on it in May. At the same time, Hong Leong said it plans to raise up to RM1.6 billion from a renounceable rights issue and RM1.8 billion from the sale of capital qualifying securities. The submission brings the deal, which would create the country’s fourth biggest banking group, a step closer to completion. However, it did not include a share option that was requested by EONCap. Hong Kong investment firm Primus Pacific Partners Ltd, EONCap’s single biggest shareholder with 20.2 per cent, has been resisting the takeover. It paid RM9.55 per share for its stake while Hong Leong’s fresh offer is worth RM7.30 a share. On April 18, Primus said it had no plans to sell its shares although it appears that the deal will happen if enough shareholders say yes. This is because Hong Leong is proposing to buy EONCap’s entire asset and liabilities, a method that requires the nod of just over 50 per cent of EONCap shareholders. “We target to have our extraordinary general meeting to seek our shareholders’ approval for the transaction by end of May,” Raymond Choong, president of Hong Leong Financial Group Bhd (HLFG), said in a statement. “The proposed rights issue, on the other hand, is undertaken to strengthen our capital base after the completion of the

acquisition of EONCap assets and liabilities” Choong added. Hong Leong plans to ask HLFG to subscribe to its portion of the rights issue, which will raise RM1.02 billion for the lender. Hong Leong’s offer comes with several conditions. Chief among them is that it has to be satisfied after going through the books of EONCap.

21/05/2010

If the due diligence reveals any adverse effects on EONCap’s financial position or any contingent liability that amounts to at least RM100 million, Hong Leong will offset its bid price against that sum or it could also choose to drop the deal. EON Defies Credit Suisse, Biggest Shareholder on Malaysian Bank Takeover EON Capital Bhd.’s board will defy opposition from Credit Suisse Group AG and its largest investor by asking shareholders to vote in favor of a sale to Hong Leong Bank Bhd. in what would be Malaysia’s biggest bank takeover in four years. Hong Leong, controlled by billionaire Quek Leng Chan, has offered 5.06 billion ringgit ($1.5 billion) for the owner of Malaysia’s seventh-biggest bank. Independent adviser Credit Suisse and Ng Wing Fai, an EON director and managing director of 20 percent shareholder Primus Pacific Partners Ltd., oppose the bid, according to a statement from EON today. EON’s board says shareholders need to consider the impact of increasing competition, tougher capital rules and the entry of foreign banks into Malaysia. The 7.30 ringgit per share offer values the Kuala Lumpur-based company at 1.4 times book value, compared with an average of 1.9 times for Malaysia’s nine listed banks, according to data compiled by Bloomberg. “There is the possibility of shareholders rejecting the offer in an extraordinary general meeting, thereby forcing Hong Leong Bank to increase its offer price,” RHB Research Institute Sdn. analyst David Chong said in a report today. He maintained his “outperform” rating on the stock. Hong Leong made a first offer on Jan. 21 at 7.10 ringgit per share, equal to the stock’s closing price that day, and won the backing of EON’s board on April 2 when it raised the bid by 3 percent. The stock closed unchanged at 6.92 ringgit in Kuala Lumpur today. ‘Disagreement’ Ng “expressed his disagreement” and believes the sale “is not in the best interest of the company,” EON said in its statement today. Credit Suisse deemed the offer “not fair from a financial perspective,” according to the statement. Primus paid 9.55 ringgit a share for its stake in 2008. Government-owned Khazanah Nasional Bhd., the Employees Provident Fund, and businessmen Rin Kei Mei and Tiong Hiew King, jointly hold more than 50 percent of shares in EON, according to the statement. For the sale to go through, the board needs acceptances from 50 percent plus 1 share. It has not set a date for a shareholder meeting. The board said it had also considered the views of its adviser Goldman Sachs (Singapore) Pte, and had taken a “holistic approach” to the offer. Connie Ling, a spokeswoman for Goldman Sachs in Hong Kong, declined to comment on what advice Goldman Sachs had given. Josephine Lee, a spokeswoman for Credit Suisse in Hong Kong, declined to comment. ‘Offer is Low’ A takeover of EON would help Quek create the Southeast Asian nation’s fourth-biggest banking group with assets of about 121 billion ringgit. “Our view remains that Hong Leong Bank’s offer is low at 1.42 times book, without incorporating a sufficient takeover premium for the takeover of a business in its entirety,” Wong Chew Hann, an analyst with Maybank Investment Bank Bhd., wrote in a report today. Maybank retained a “hold” rating and 7.20 ringgit forecast for the stock. The bid comes as Malaysia accelerates efforts to open the financial industry. Industrial & Commercial Bank of China Ltd. on April 28 started operations in Malaysia after the government granted it the first permit to a foreign lender in nine years.

21/05/2010

Malaysia plans to award as many as nine new financial- services licenses this year to overseas companies, Prime Minister Najib Razak said in April 2009. EONCap board approved submission offer to shareholders The Board of EONCAP (via MIMB) has approved (with the exception of Primus’s CEO) to forward Hong Leong Bank’s asset and liabilities purchase offer to shareholders via an EGM which will be announced at a later date. The Board of EONCAP has also proposed to distribute the full sales proceed via special dividend and capital repayment to

25/05/2010

shareholders once the sales has been concluded. The expected date for the full distribution is by end 2010. EONCap to issue notice to shareholders The board of EON Capital Bhd (EON Cap) is expected to send out to shareholders its EGM notice and circular on the RM5.06bil takeover offer from Hong Leong Bank Bhd (HLB) this week. It is understood that the banking group held a board meeting yesterday to discuss what would be written in the circular after it had decided to go ahead and table the proposed offer to shareholders despite facing resistance from its independent financial adviser (IFA), Credit Suisse Securities (M) Sdn Bhd, who has said the proposal was “not fair from a financial perspective.” HLB values EON Cap at 1.42 times book. A source familiar with the matter said the notice and circular could be send out earliest by tomorrow, with the board meeting for this purpose yesterday. “The challenge is in the wording used in the circular as it must be convincing enough in light of the IFA’s opinion and because it must include the views of the party which objects,” the source said. On Friday, EON Cap said it would recommend to shareholders to accept the RM5.06bil, which works out to RM7.30 per share, takeover offer from HLB to shareholders at an upcoming EGM despite the disapproval of its IFA as it was “in the best interests” of the financial group. Director Ng Wing Fai, who represents EON Cap’s largest shareholder, Primus Pacific Partners Ltd, with its 20.2% stake, expressed his disagreement in the statement, saying that the proposed disposal was not in the best interests of the company. Primus bought its shares at RM9.55 each in February 2008 and accepting HLB’s offer would crystalise its losses. Ng’s views would be included in a circular to be sent to shareholders, EON Cap had said. After the circular is sent out, the EGM should be held within 14 days. In the interim, it’s business as usual for the banking group. “Now that the offer will be tabled, we’ll just have to wait and see what happens. In the meantime, management is driving business as usual,” EON Bank group chief executive officer Michael Lor told StarBiz yesterday without elaborating. EON Bank is EON Cap’s main asset. Analysts said the bank on Friday reported results above estimates, with net profit for the first quarter ended March 31 at RM97.8mil, 23% higher compared with a year ago, boosted by savings on operating expenses that totalled RM36.1mil. However, most houses did not make changes to their calls on the company’s stock following the release of the results. “EON Cap achieved loans growth of 2.4% quarter-on-quarter, translating to annualised loan growth of 9.5% year-on-year marginally below our estimated 10.8% for FY10,” AmResearch said in a note yesterday. The proposed takeover of EON Cap by HLB has been ongoing since the beginning of the year when HLB first made a RM4.92bil offer for EON Cap’s assets and liabilites. It was consequently rejected by the board for being “too low.” The offer was then improved to the current one. EON Cap’s major shareholders Rin Kei Mei, Tan Sri Tiong Hiew King and Khazanah Nasional Bhd remained committed to disposing of their stakes in EON Cap, analysts said. The three have a combined 41.7% stake in EON Cap, which implies they would only require the support of the Employees Provident Fund (EPF), with an 11.8% interest, for the deal to succeed as the asset-liability mode of acquisition requires a 50% plus one vote from shareholders.

21/06/2010

The EPF had been reported to have said that it would not abstain from voting at the upcoming EGM. Malaysia EON Capital delays EGM on Hong Leong merger KUALA LUMPUR, June 22 (Reuters) - Malaysian lender EON Capital EONP.KL will delay an extraordinary general meeting to vote on a merger with Hong Leong Bank (HLBB.KL) after a key shareholder filed a lawsuit to block the deal, an EON Capital source said. The delay comes after Hong Kong-based private equity fund Primus Pacific Partners, EON Capital's biggest single shareholder with a 20 percent stake, said on Monday it had filed a lawsuit alleging the 5.1 billion ringgit ($1.60 billion) offer that would create Malaysia's sixth biggest lender, was unlawful.

"The EGM date will not be announced today, it will be announced at a later date," a source, who asked not to be named because he is not authorised to comment, said on Tuesday. EON Capital had been expected to announce the date of the EGM on Tuesday. EON Capital said late on Monday that it would seek legal advice over the suit. The firm declined to comment on Tuesday but will hold its annual general meeting on Tuesday where it is expected to address the issue. The delay may put the deal in jeopardy after Hong Leong said late on Monday that it may walk away from the deal if it does not have shareholder approval by August 15. Hong Leong first attempted to buy out EON Capital in January when it offered 4.92 billion ringgit but EON Capital's board rejected the offer because it considered it too low. Hong Leong launched a second offer after EON Capital appointed new board members and Primus said the new board members acted in the interest of some shareholders against the interest of others.

07/07/2010

In 2008, Primus paid 9.55 ringgit per EON Capital share for its 20 percent stake, well above the 7.30 ringgit Hong Leong is currently offering. ($1=3.186 Malaysian Ringgit) EONCap Saga continues : Proceed with EGM Eon Capital’s directors, except for Ng Wing Fai, plan to ask shareholders at an EGM to empower the board to make a final decision on whether or not to accept the deal. Eon Capital Bhd (EONCap) (5266) has decided to go ahead and table to its shareholders a RM5.06 billion takeover offer from Hong Leong Bank Bhd despite an ongoing lawsuit over the matter. Its directors, with the exception of Ng Wing Fai who represents the single largest shareholder Primus Pacific Partners, plan to ask shareholders at an extraordinary general meeting (EGM) to empower the board to make a final decision on whether or not to accept the deal. It said the board would only make the decision if shareholders gave the go-ahead for the deal at the EGM, and after it gets the approval of the Minister of Finance. More importantly, the board’s decision is subject to a final decision by the Kuala Lumpur High Court on the lawsuit filed by Primus last month, it said in a stock exchange filing late yesterday. “This means, after getting all the approvals, the transaction will only go through if the court deems it lawful,” a source familiar with the matter said. Primus claims the Hong Leong deal is unlawful in the way it is structured and wants EONCap’s directors to pay the bank damages of RM1.1 billion if the takeover bid goes through at an EGM. On Tuesday, it also threatened to start contempt proceedings against the directors should the bank go ahead with the EGM. But by saying it would wait for the court’s decision, EONCap seems to have found a way around potentially being sued for contempt, a banking analyst observed. However, there are still concerns as to whether Hong Leong will decide to stay on with the deal given that the court matter could drag on. The case will go to trial only from September 20 whereas Hong Leong has said it may walk away if all approvals for the deal are not secured by August 15. Hong Leong has yet to indicate if it will extend its offer beyond that date. Meanwhile, EONCap said that it would convene the EGM in “due course”. A source said it may take one to two weeks before the group is able to issue a circular on the matter to shareholders. It is possible an EGM may take place in mid- to late August. Primus is against Hong Leong’s offer of RM7.30 a share as this is much lower than its entry cost of RM9.55 a share in 2007. It thinks a fair price should be at least RM8.91.

28/07/2010

EONCap’s share price closed at RM6.89 yesterday. EONCap sequel: EGM on 19 August The board of EON Capital Bhd, owner of Malaysia’s seventh largest bank, will ask shareholders to vote on Hong Leong Bank

Bhd’s RM5.06bil (US$1.6bil) takeover offer on Aug 19, according to a statement sent to Bursa Malaysia yesterday. The move defies EON Cap’s biggest investor which has threatened to seek RM1.11bil in damages if the deal goes through at the current price. Shareholders are divided over whether to accept an all-cash offer of RM7.30 a share from billionaire Tan Sri Quek Leng Chan’s Hong Leong Bank (HLB). Primus Pacific Partners Ltd, a Hong Kong-based investment fund, is EON Cap’s biggest shareholder and opposes the deal, having paid RM9.55 a share for its 20% stake in 2008. That’s 31% more, or a difference of RM315mil, based on Bloomberg calculations. Primus, which has one seat on EON Cap’s board, said it filed a lawsuit against its nine other directors on June 21, claiming they handled HLB’s bid improperly. The High Court has fixed trial dates from Sept 20 to 28, more than a month after HLB’s offer is scheduled to lapse on Aug 15. EON Cap rose 0.14% to close at RM6.94 yesterday. The FTSE Bursa Malaysia KLCI rose 0.03%. HLB was unchanged at RM8.86. An EON Cap takeover would help Quek create Malaysia’s fourth biggest banking group with assets of about RM121bil. For the sale to go through, the board needs acceptances from 50% plus 1 share. Government-owned Khazanah Nasional Bhd, the Employees Provident Fund, businessmen Rin Kei Mei and Tiong Hiew King jointly hold more than 50% of the shares, according to an EON Cap statement on May 21.

20/09/2010

HLB’s offer was also dependent on the result of the Primus lawsuit and approval from the Finance Minister, EON said on July 7. Primus Sues EON Directors to Prevent Takeover of EON Capital, SCMP Says Primus Pacific Partners, a Hong Kong-based private equity company, is suing nine directors of EON Capital Bhd., a Malaysian lender in which Primus owns 20 percent, to prevent the planned takeover of the bank, the South China Morning Post reported, citing court documents.

28/09/2010

The proposed sale to Hong Leong Bank Bhd. undervalues EON, Primus plans to say in a trial that starts in Kuala Lumpur today, according to court documents, the report said. EONCap Shareholders say Yes for sale of EON Bank EON Capital Bhd (EONCap) has received 97% of the voting shares at the EGM called to consider the proposed acquisition of the group by Hong Leong Bank Bhd for RM5.06bil cash, says chairman Gooi Hoe Soon. “The proposed disposal was carried with 97% voting for the resolution and 3% against it,” he told reporters yesterday after the group’s EGM. Gooi said shareholders representing 436 million shares or 63% of EONCap’s total share capital attended the EGM and voted on the resolutions. Gooi Hoe Soon said shareholders representing 63% of total share capital attended the meeting. He also said representatives of Primus (M) Sdn Bhd, the single largest stakeholder of EONCap which holds 20% of the group, had walked out of the EGM before the voting started. Primus is currently fighting a case in court to stop the proposed acquisition by Hong Leong Bank, citing that it was not lawful and not in the best interests of the group. When asked to...