MUMBAI: Malaysia could finally see a big bank deal after various efforts to squish together the country’s financial institutions failed in recent years.
Sources told Reuters that RHB wants to buy AmBank in a deal that would merge the fourth and sixth-largest lenders into a US$9 billion (RM38.59 billion) group.
Big shareholders may also be keener to do a deal this time around.
A union would be half the size of the aborted, three-way union between CIMB, RHB, and Malaysia Building Society.
That cash and share tie-up, which would have been the country’s largest M&A deal, fell apart in 2015 because of a fiddly structure and a collapse in the oil price.
It was also unclear back then if RHB shareholder Aabar, an Abu Dhabi sovereign fund, was supportive.
Things now look a lot easier. Higher crude prices are good news for the oil-exporting economy generally.
The two banks in particular are also lenders to oil and gas companies. That makes it easier to be confident about loan quality.
Aabar and its 18% stake in RHB has also since been folded into Mubadala, a bigger, better-run sovereign fund, after the former became tangled up in the scandal over missing money at Malaysian peer 1MDB.
The new owner may be less worried about crystallising losses on the high price Aabar paid for its RHB shares in 2011, around twice the current level.
Meanwhile, AmBank’s 77-year-old founder and chairman Azman Hashim is edging closer to retirement.
With no clear family successor and a stated ambition to push the bank into the top four by 2020, he might be willing to fold his near-13% stake into a bigger entity.
A deal would also make it easier for 24% owner Australia and New Zealand Banking Group to exit as it continues to slim down overseas.
So the biggest hurdle might be something traditional, like price.
Assuming a straightforward all-share deal, based on undisturbed values on May 29, RHB would represent 58% of the enlarged entity by market capitalisation before any premium.
RHB, however, will probably have to give up some of its share for control of its smaller, slightly healthier rival. The long wait for more bank consolidation in Malaysia might be over.
The banks could announce as early as June 1 that they have received approval from the central bank to commence merger negotiations, the sources said.
RHB, the country’s fourth-biggest bank, would be the acquirer, the sources said, adding the shareholding structure was still being worked out.
AmBank is the sixth-biggest bank. It has a market capitalisation of RM15.7 billion and a complete takeover by RHB could be one of the biggest deals in Malaysia in recent years.
Shares in RHB and AmBank were suspended from trading on June 1, “pending a material announcement”.
AmBank declined to comment. An RHB spokeswoman said the company would make an announcement in due course.