The Malay Consultative Council or Majlis Perundingan Melayu (MPM) wants Bank Negara Malaysia (BNM) to review its decision in not considering AFFIN HOLDINGS BHD []’s application to talk to EON CAPITAL BHD [] (EONCap) and its major shareholders for a potential merger.
MPM chief Datuk Ibrahim Ali described the central bank’s decision last Monday to reject Affin’s bid to enter into talks with EONCap as “hurried and unfair”.
Urging the government to intervene in the matter, he warned of “political implications” should both institutions be denied the chance to negotiate a merger.
Ibrahim claimed that it showed “elements of BNM’s interference in business transactions”.
BNM had not given any reason for being “unable” to consider Affin’s application, but it is widely believed that reservations about Affin’s balance sheet strength to undertake such an exercise may have played a big part in the decision.
Affin managing director Tan Sri Lodin Wok Kamaruddin had said the country’s second smallest bank had the financial “capacity” to undertake the takeover.
Affin is also in the midst of talks to acquire a majority stake in a small Indonesian lender, PT Bank Ina Perdana. It is hoping to complete the acquisition by the third quarter of the year.
Armed forces pension fund Lembaga Tabung Angkatan Tentera (LTAT) owns 32% of Affin, while Hong Kong’s Bank of East Asia has 22%.
Following BNM’s decision, the path is clear for HONG LEONG BANK BHD [] (HLBB), which is controlled by Tan Sri Quek Leng Chan, to proceed with its takeover offer of the EON banking group as there is no other potential suitor in the horizon.
“BNM’s rushed decision on this issue must be carefully handled because it has political implications and can affect the good name of the government and the prime minister’s leadership.
“It is strange and extraordinary that a bank like EONCap, founded by the government and duit rakyat, can change hands to private ownership to Hong Leong Bank,” Ibrahim told reporters at the Kelab Sultan Sulaiman in Kampung Baru here yesterday evening.
Ibrahim, who also leads bumiputera rights pressure group Perkasa, also demanded that BNM act more transparently.
He also threatened to organise protests outside BNM’s premises should the central bank fail to heed MPM’s demands on the matter.
The independent member of parliament for Pasir Mas also called on the central bank to halt EONCap’s ongoing negotiations with Hong Leong or at the very least, allow EONCap to “operate as normal”.
Ibrahim claimed to have knowledge that Affin had proposed a better offer than HLBB’s and that EONCap’s major substantial shareholder, the Employees Provident Fund (EPF), had “agreed for Affin to be given priority”.
“BNM’s decision raises question marks. I don’t know who the invisible hands behind this (are). If they (BNM) say they are doing this on merit (or that) they are doing this on who gave the best offer, then they are talking nonsense because we know that Affin Bank has offered better than Hong Leong,” Ibrahim said.
It was speculated that Affin was planning a general offer in EONCap for RM7.50 per share, higher than HLBB’s RM7.30 per share price tag.
EONCap’s shareholders are now left with HLBB’s offer of RM5.06 billion for the assets and liabilities of the country’s seventh-largest bank.
The offer translating into RM7.30 per share is 1.43 times of book value based on EONCap’s shareholders’ fund of RM3.55 billion as at Dec 31, 2009 — higher than HLBB’s previous offer of 1.39 times.
Ibrahim also urged Prime Minister Datuk Seri Najib Razak to immediately intervene in the matter.
To a question, Ibrahim denied that seeking the prime minister’s intervention in the bank merger discussions would affect market confidence.
“This is a prudent intervention (sought) and proves that the government is transparent... So if it is said that this intervention will give a bad impression to investors, I don’t think it is so because I am worried that without this intervention, the decision to give it to Hong Leong will create other tensions to investors or political tensions,” said Ibrahim.
MPM secretary-general Dr Hasan Mad added that government intervention was “essential” and that Ibrahim was not seeking “intervention favouring any party but intervention to fix a situation, a fair exercise”.
Ibrahim also claimed that there would be “synergy” in an Affin-EONCap merger as both institutions could leverage on each other’s strengths and customer base.
He added that the outcome of a merger of Affin and EONCap would help achieve the prime minister’s 1Malaysia objectives.
Written by Chua Sue-Ann
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