China Construction Bank Corp (CCB) has approached the Malaysian government about buying a stake in lender EON Capital, a source with direct knowledge of the matter told Reuters today.
China’s No.2 lender is awaiting Malaysia’s Ministry of Finance’s response to its request for approval to begin talks with major shareholders in Malaysia’s seventh largest bank by market capitalisation.
“This is still at a very early stage. We’ve informed the Malaysian finance ministry,” said the Beijing-based source.
“There are many other departments, including the Malaysian central bank. This might even need the approval of the prime minister. The specifics of the approval process aren’t entirely clear,” said the source, who asked not to be named because of the sensitivity of the deal.
EON Capital, with a market capitalisation of about $1.6 billion, is the subject of a legal battle involving its largest shareholder, Hong Kong-based private equity fund Primus Pacific Partners, and other shareholders, over a plan by Hong Leong Bank to acquire the smaller lender.
Primus filed a lawsuit to stop Hong Leong Bank, Malaysia’s sixth largest lender, from taking over EON Capital last year. The case is ongoing.
When contacted, a Bank Negara official said: “As a matter of policy, the central bank does not comment on individual institutions.”
Primus and CCB also declined to comment, while EON could not be reached for comment.
Stanley Li, a Chinese banking analyst with Mirae Asset Securities, said a move by CCB on EON would be in line with Chinese banks’ strategy to expand overseas, and Southeast Asia was a natural choice given their relatively close trade relationships.
“Most Chinese banks’ Chinese business accounts for 90 percent of their revenue. In the longer run all the banks will need to diversify their revenue sources to outside China.” - Reuters
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