Hong Leong Bank Bhd (HLBB) and EON Capital Bhd (EONCap) have given themselves a time extension to obtain the relevant approvals for their proposed transaction on the sale of the latter’s assets and liabilities to the former by Nov 30, from Aug 15 previously.
This follows a court petition filed by EONCap major shareholder Primus (M) Sdn Bhd in the High Court here against certain shareholders and directors of EONCap seeking various declarations and orders as well as some RM1.12 billion (equivalent to RM1.61 per share) in damages from them if the proposed sale were to go through.
The revised deadline has given EONCap, or at least the affected shareholders and directors, some breathing room to see through the court case first before all parties commit to the completion of the proposed deal.
EONCap had earlier said that its shareholders’ approval to empower the board to decide whether to accept the offer will be subject to the final decision of the High Court case. This could mean that the proposed sale to HLBB would collapse if the court decision was not in favour of the EONCap directors and shareholders.
Notably, under the revised terms, HLBB and EONCap have agreed that EONCap will have until Aug 20 to call for an EGM for its shareholders to consider the proposed deal, and all relevant approvals, including that of HLBB’s shareholders and the regulators, will have to be concluded by Nov 30.
The regulators comprise Bank Negara Malaysia/the Minister of Finance and the Securities Commission.
In an announcement to Bursa Malaysia yesterday, EONCap said it had received a letter from HLBB on the same day that stated the latter banking group’s acceptance of a revised timeline for the offer.
EONCap said HLBB considered the High Court petition by Primus as an internal matter which did not need to be incorporated into the terms of the offer.
HLBB requires that given the condition pertaining to the final decision of the High Court, EONCap will only be able to accept its offer if that decision was obtained within five business days after the date of the last approvals.
This means that the crucial time period will be between Nov 25 and Nov 30, for all approvals to have been obtained and the court case dispensed with.
Hence, an expedient disposal of the court case will be a factor in determining the completion of the proposed deal. However, observers questioned if the extended deadline could still be met given the high probability of a protracted court case that could include appeals to higher courts.
Prior to HLBB’s agreement to the time extension, EONCap’s board had said it would proceed with its shareholders’ meeting, despite the court having fixed a case management date on Aug 17 for Primus Malaysia’s petition.
“Although it would not be beneficial for HLBB to wait too long, these amendments to the deadline show that HLBB perceives EONCap to be a valuable addition and really want this deal to take place,” an industry observer said.
To recap, Primus Malaysia’s claim for RM1.12 billion in damages from the EONCap directors and shareholders implies its higher asking price of RM6.18 billion or RM8.91 per share, equivalent to the amount recommended by an independent financial adviser, versus HLBB’s offer of RM5.06 billion or RM7.30 per share.
Primus Malaysia’s parent Primus Pacific Partners is a major shareholder of EONCap, with a 20.2% stake. Primus had opposed the takeover by HLBB as the Hong Kong-based private equity fund purchased its stake at RM9.55 a share which was well above HLBB’s offer price of RM7.30.
It was earlier learnt that Primus’ legal team had threatened to initiate contempt of court proceedings against the defendants if they were to proceed with despatching the EGM circular for shareholders to consider the HLBB offer.
This article appeared in The Edge Financial Daily, July 15, 2010.
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