Published September 30, 2008
Cut loss and abort BII bid, Maybank urged
Or strike new price given current crisis, adds minority shareholder group
By PAULINE NG IN KUALA LUMPUR

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MALAYSIA'S Minority Shareholders Watchdog Group (MSWG) wants Maybank to call it quits and cut its losses on the bungled Bank Internasional Indonesia (BII) deal rather than prolong the uncertainty for its shareholders.
'If the deal allows you to get out, cut your losses now,' MSWG chief executive Abdul Wahab Jaafar Sidek said of Maybank's proposed acquisition of BII, which went uncompleted after it missed last Friday's deadline.
Maybank yesterday requested a two-day trading suspension of its shares pending an announcement on the problem-plagued acquisition, which, in the over six months since the share sale agreement was inked, has been in a state of flux.
Last week's two new conditions set by the Malaysian central bank for a deadline extension and better pricing for the Indonesian bank could prove to be the final straw.
Mr Wahab said that MSWG's position is simple: the deal to buy Sorak Financial Holdings - which holds more than half of BII and is controlled by Fullerton Financial and Kookmin Bank - should not go through unless the price reflects present global market conditions.
Rather than pay 4.6 times book for BII, Maybank should only pay 2-3 times book given that big-name financial institutions are trading at steep discounts in the current financial crisis.
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Indeed, if a week is a long time in the sub-prime crisis, Maybank has belatedly discovered that six months is another era altogether.
In March, after its successful tender for Sorak, the country's biggest banking group by assets was brimming with confidence that it had sufficient cash and liquid assets to fund its RM8.6 billion (S$3.6 billion) purchase of BII and would only need to raise equity funds to maintain its capital adequacy ratio.
Maybank said that it had raised RM6 billion to fund its BII buy, but at this point would be paying more to borrow, bankers said.
Assuming Maybank were to raise RM12 billion in total capital (it also bought a fifth of Pakistan's MCB Bank for about RM3 billion), there would be further downside to its earnings due to higher borrowing costs, which would in turn result in weaker return on equity and long-term growth rates, Hwang-DBS Vickers observed in a client note.
In the time that it takes for Maybank to add value and to recover its investments, its capital adequacy ratio would also have to be maintained.
Concerned minority shareholders asked whether the bank would need recapitalisation and many other questions at its shareholder meeting last week which lasted four hours.
The MSWG had earlier demanded the board's resignation over the overpriced deal, and the Employees Provident Fund, which owns about 11 per cent of the bank, added to the chorus of protests at the meeting.
In reassessing the BII purchase in light of the worsening financial turmoil, Bank Negara last week voiced its concerns that Maybank's financial soundness at the agreed upon price of 510 rupiah (76.5 Singapore cents) per share, and the knock-on effect that a shaky Maybank would have on the country's banking system would necessitate a new agreement on price.
Fullerton did not respond to queries. Maybank's RM480 million deposit is likely to be forfeited, but Fullerton has also stressed it reserves its rights under the agreement.