Tuesday, February 14, 2006

BCHB's Offer For Southern Bank (Updated)
Strange Why Investors Are Not Expecting Better Counter Bids

Bumiputra-Commerce Holdings Bhd (BCHB) on Feb 13 announced a takeover bid of up to RM6.35 billion for Southern Bank Bhd (SBB), with Datuk Nazir Razak saying they will leave it to SBB shareholders to decide. In conjunction with that, BCHB served a conditional notice of voluntary general offer (VGO) to acquire all the outstanding shares and warrants of SBB for cash and new BCHB redeemable convertible unsecured loan stocks (RCULS) of RM1 each. BCHB’s maximum total outlay will be RM6.35 billion. It offers to acquire SBB’s entire business and undertaking of SBB for a sum equivalent to RM4.08 comprising RM3.08 cash per share and RCULS at RM1 each. It will also acquire all oustanding SBB warrants at RM2.34 per warrant not already held by BCHB. BCHB said the effective offer price for each share was about RM4.15 based on the theoretical price of the RCULS as at Feb 10 of about RM1.07. As part of the proposals, SBB will carry out a capital reduction exercise to return all the profit arising from the disposal of the SBB business, share capital, share premium, other reserves and retained earnings to SBB shareholders. BCHB and persons acting in concert held about 4.9% of SBB shares.

Points To Consider #1 - It is probably a very similar offer that BCHB made to Tan a few weeks back. I don't see the price being improved at all. One was offering around RM4.20 and the other wanting RM4.50. So, nothing has changed

Points To Consider #2 - By putting the offer out in the open, it forces Southern Bank, and in particular Tan onto the back foot. The real offer is on the table, now do you have a better one that can top that. If SBB cannot find a buyer willing to pay more, it will probably have to accept BCHB's offer

Points To Consider #3 - The fact that BCHB and persons acting in concert only holds about 4.9% of SBB shares. That means BCHB could walk away anytime from the deal as they do not have a lot riding on this.

Points To Consider #4 - The fact that SBB's share price only rose slightly but below the actual offer of BCHB meant that most investors do not think there will be a counter offer or new bidder for SBB. Very surprising indeed

I do expect other parties to be interested, such as Public Bank, Hong Leong Bank and Alliance Bank. Their non-action is quite surprising to say the least. Watch this space. Monitor SBB's share price closely, any marked movement upwards will point to a much better bid for SBB. Besides the 3 banks I mentioned, there is another very likely suitor, i.e. Maybank. The reason why Maybank could be interested is manifold, mainly due to the fact that BCHB has been gobbling up brokers and banks that they are getting ever closer to Maybank's size and stature. BCHB has been acquiring like crazy and consolidating well. BCHB has been doing so well, growing so fast, that Maybank may have no choice but to act. Maybank may have to buy up SBB to distance itself from the second placed bank. If BCHB succeeds in acquiring SBB, it will be too close for Maybank's comfort. One or two more acquisitions may even put BCHB above Maybank in size, and that is quite unthinkable to Maybank. So, if Maybank could be in the picture, SBB price should go higher than the current RM4.04-4.06.

5 comments:

zentrader said...

"Fact #1 - ... Goldman Sachs thought SBB was worth at least RM5.00 per share."

Accordingly, this might the price a foreign bank is willing to pay for SBB?!

zentrader said...

"do expect other parties to be interested, such as Public Bank, Hong Leong Bank and Alliance Bank. Their non-action is quite surprising to say the least."

I think BNM has played big hand on this and no one dare to say or propose anything?!

Salvatore_Dali said...

well Gsach said it was worth that price cos GSachs was advising SBB, you want to be on the side you are advising.Not necessarily a px a foreign bank would pay, cos you need to pass a number of hurdles as a foreign entity before you can own a bank in Malaysia, and even then, a small stake only, never a controlling stake.

zentrader said...

Like the old chinese saying, two fighting eventually the fisherman get the benefit.

zentrader said...

SBB RM4.1 now and I think your prediction on MBB's move is good.