Published September 18, 2008

Maybank shares slide after it gets nod for BII purchase

By PAULINE NG
IN KUALA LUMPUR
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SHARES of Maybank fell 6.76 per cent yesterday, a day after its controversial purchase of Bank Internasional Indonesia (BII) was set back on track.

Bapepam's granting of some flexibility in the Maybank purchase of BII was reciprocated by Bank Negara's reinstatement of its earlier approval, paving the way for the Malaysian bank to complete the deal.

But the prospect of the RM8.6 billion (S$3.6 billion) transaction being completed at a time of great turmoil in global financial markets did not go down well with investors. Maybank dropped to a 10-week low of RM6.90 yesterday for a loss of 50 sen compared to the broader Kuala Lumpur Composite Index's 0.93 per cent loss.

Analysts said that having overpaid for the Indonesian bank, Maybank will now have to raise about half of the acquisition price in a tightening credit market.

Hwang-DBS Vickers said imputing a 6 per cent interest cost to its total capital raising exercises, the bank's FY09 earnings were expected to be dampened by 11 per cent. It rates the bank fully valued at RM7.



Earlier it appeared that Maybank would be let off the hook, unable to complete the BII deal because of new takeover rules at the end of June by the Indonesian financial market watchdog which had led the Malaysian central bank to revoke its approval for the transaction on the grounds that Maybank could suffer impairment charges amounting to RM3.4 billion.

But just a few days after it categorically said it would not entertain any exceptions to its new rules as it did not want to create a negative precedent, Bapepam made another U-turn.

Maybank told the exchange on Tuesday that Bapepam's letter of Sept 15 touched on the possibility of a conditional extension to the two-year timeframe for the 20 per cent re-float requirement under the new takeover rules. A conditional extension would be considered should a re-float exercise risk potential material losses to the new controlling party exceeding 10 per cent of its total investment in the acquired company.

Bapepam's irrational behaviour did not go unnoticed. 'Strangely, this decision came after it rejected Maybank's earlier appeal for a waiver to the sell-down requirement, stating that if they considered an exemption, it would create a negative precedent to the newly introduced regulation,' Hwang-DBS Vickers said in a client note.

In its Sept 9 letter, Bapepam also said an exemption would undermine the fundamental and objective of the new rules as well as its regulatory function.

Maybank on Tuesday said that since all conditions precedent to the share sale agreement signed in March after it won a bid for Sorak Financial Holdings had been met, it would engage with Fullerton and Kookmin Bank towards completing the deal. Fullerton owns 75 per cent of Sorak - the controlling shareholder of BII - and Kookmin Bank the balance.