It is understood that EONCap has since obtained board approval to engage with Hong Leong on a number of issues.
"They need to engage on a number of issues, including an extension of the offer," a source familiar with the matter told Business Times.
Hong Leong had set an April 30 deadline for EONCap to accept its offer, and analysts think it will likely extend the deadline again, for the third time, now that it looks like the deal is closer to coming to fruition.
The takeover has turned out to be a long-drawn affair, at over a year, the longest ever in the Malaysian banking sector. This is due to resistance from EONCap's biggest shareholder, Hong Kong-based private equity firm Primus Pacific Partners (PPP), which stands to make a loss on its investment.
Analysts had widely expected the High Court's move in dismissing the petition that was filed by PPP's unit, Primus (Malaysia) Sdn Bhd, in mid-2010.
Primus claimed that Hong Leong's offer was unlawful in the way it was structured and that the directors had breached their fiduciary duties in tabling it to EONCap's shareholders. Primus was suing the directors for RM1.1 billion.
Judicial commissioner Varghese George Varughese, who has been presiding over the case, concluded that Primus' motive in pursuing the petition was "purely to buy time" to secure a higher bidder than Hong Leong so that PPP's potential losses would be reduced.
"Alternatively, the petition was pursued with the hope ... I believe, that it will wear out the patience of Hong Leong and/or frustrate the intention of (some of the respondents and Khazanah Nasional Bhd) for an early and neat exit from the company," he read from his 100-page written judgement at the Penang High Court, where he is currently based.
Hong Leong's offer for EONCap's assets and liabilities works out to RM7.30 a share, much lower than the RM9.55 a share PPP paid to obtain its 20.2 per cent stake in 2008.
Hong Leong made that offer in April last year, improving on an earlier RM4.9 billion offer.
Varughese ruled that the current offer is legal and said there was no evidence that EONCap's directors had not acted in the best interests of the company.
"There was no visible departure from standard practice of fair play," he remarked.
He said Primus had failed to prove eight complaints that formed the foundation of its petition. He then ruled that Primus would not be entitled to any of the relief it sought, and dismissed the petition with costs to be borne by Primus.
Those costs will be decided by him, after getting guidance from the parties involved, after May 16.
Still, Primus intends to appeal the case, a move analysts say could stall the takeover further, but not likely by much.
It is understood that Primus can file an appeal within 30 days.
"It all boils down now to how fast the appeal is concluded. I still think the merger will go through," said Lim Sue Lin from HwangDBS Vickers Research.
On recent talk that China Construction Bank (CCB) aimed to acquire a stake in EONCap, analysts said it was more likely at this point that CCB, if it was genuinely interested, would pursue a stake in the merged entity.
Hong Leong's shares rose 6 sen to close at RM10.40 yesterday, off an intra-day high of RM10.54. EONCap, meanwhile, edged up 5 sen to RM7.23. - By Adeline Paul Raj of btimes.com.my
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