The RHB Bank Bhd (RHB) and AMMB Holdings Bhd (AmBank) merger would allow the enlarged entity to claim the number one spot for asset management, general insurance and equity broking, and the number two spot for Islamic banking in Malaysia, according to analysts.
In a statement today, AllianceDBS Research said if the deal goes through, the merged entity would also become Malaysia’s fourth largest bank with an estimated asset of RM386 billion, and ASEAN’s ninth largest in terms of assets.
It said acceptance by the other key stakeholders would remain a risk, with pricing and shareholders’ approval being deal-breakers for most mergers and acquisitions (M&A).
According to the M&A plan, RHB will acquire AmBank, and both banks have obtained Bank Negara Malaysia’s approval to commence merger negotiations.
The transaction would be an all-share deal, and the two banks would have until Aug 30 to negotiate a deal, to be automatically renewed if necessary.
By acquiring the assets and liabilities of AMMB, both banks would be required to hold their extraordinary general meetings (EGM), in which AmBank and RHB would need 75 per cent of votes and 50 per cent plus one vote, respectively.
AllianceDBS said it was downgrading its call on AmBank to “hold” (from “buy”) but with a higher target price (TP) of RM5.40, while reinstating RHB to “hold” with TP of RM4.90.
Meanwhile, in a statement today, Hong Leong Investment Bank (HLIB) Research said that it could see potential revenue synergies in terms of strengthening the commercial banking and investment banking business.
“However, there will be areas of duplication in terms of resources and customers, as neither are market leaders.
“The new entity will create another competition, instead of leading the market,” it said, adding that the share price rally since the beginning of the year had brought valuation of both RHB and AMMB closer to their respective book value.
AmBank and RHB’s shares resumed trading today, with both rising 10 sen each at opening to RM5.49 and RM5.31, respectively, but mild profit-taking at mid-day retraced RHB to RM5.27 (- 12 sen) while AmBank eased to RM5.15 (- 6 sen). – Bernama