Chances are remote that China's second largest lender China Construction Bank (CCB) will be allowed to take a stake in EON Capital Bhd (EONCap) despite its reported interest.
Analysts said it is unlikely that Malaysian authorities will consider an eleventh-hour suitor for EONCap given that there is already an ongoing RM5.06 billion takeover offer from Hong Leong Bank Bhd, which has been pending for over a year now.
EONCap and Hong Leong obtained the go-ahead for their proposed merger from Bank Negara Malaysia (BNM) and the Ministry of Finance (MOF) in July last year.
The merger has not gone through yet because EONCap's largest shareholder, Hong Kong-based Primus Pacific Partners, is contesting it in court.
News reports about CCB's interest in the local lender resurfaced two days ago, just ahead of a court verdict this Thursday on whether EONCap can legally accept the Hong Leong offer.
Reuters reported, quoting sources, that CCB had approached the Malaysian government about its interest in buying a stake in EONCap and was awaiting the MOF's response to its request for approval to begin talks with EONCap's major shareholders.
The news is not new and had first surfaced a few months back, an analyst at AmResearch Sdn Bhd said in a report yesterday.
"We believe the possibility of CCB acquiring a strategic stake in EONCap is remote," the analyst said, keeping a "hold" rating on the stock with a fair value of RM7.30 a share, which is equivalent to the Hong Leong offer.
EONCap, meanwhile, told Business Times it is "not aware" of CCB's reported interest and is not in a position to comment on any speculation.
Chinese Premier Wen Jiabao is due in Kuala Lumpur today for a two-day visit to boost trade and investment ties between the two countries.
OSK Research, meanwhile, believes there is a possibility that BNM may consider CCB as a potential suitor if it were to take into consideration China's fast-expanding economic links with the Asean region and the need for greater financial integration.
However, there would also be numerous hurdles, it noted. For one, Malaysia imposes a 30 per cent cap on foreign ownership of local banks and this could be a problem if CCB is interested in a higher stake.
"Hong Leong's offer will still be more enticing as it is a 100 per cent all-out-cash takeover that will benefit all shareholders, versus CCB, which may only benefit selected shareholders given BNM's shareholding cap on foreigners," it remarked.
Apart from Primus' 20.2 per cent stake, the shareholding of EONCap's major owners that were committed to sell to Hong Leong stood at 54.9 per cent.
"(With) CCB's interest only at a very preliminary stage, we think that it is highly unlikely that BNM or any of the relevant parties involved would want to jeopardise the (Hong Leong-EONCap) deal," OSK said, adding that there was a "high probability" of that deal being completed. - By Adeline Paul Raj of btimes.com.my
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