What's Next For Southern Bank?
Logical Conclusion - Up
As reported in the Edge Daily over the past few days, Southern Bank Bhd (SBB) has discontinued negotiations with CIMB Group Sdn Bhd (CIMBG) on a possible merger of their banking businesses, claiming that it has not received a formal offer from CIMBG after three months of talks. The latest development could lead to a hostile takeover move by CIMBG if it wants to go ahead with its plans for the merger of the banking businesses. “The Board is of the view that further prolonged discussions would not be in the best interests of SBB and its shareholders and other stakeholders, including its customers,” SBB said. SBB also said it is informing Bank Negara that it does not intend to proceed with the merger discussions with CIMBG. It said the bank remained committed “to explore other options to maximise shareholder value”.
“The board believes that a merger with another banking institution could be value creating for shareholders at this stage in the Malaysian banking industry evolution. Hence, the board will immediately actively seek a near-term merger alternative that is in the best interest of all shareholders and stakeholders,” it said. In an immediate response to SBB’s announcement, Bumiputra-Commerce Holdings Bhd (BCHB) said: “While BCHB is disappointed with the unilateral decision of SBB’s board of directors, BCHB intends to continue discussions with shareholders of SBB, who remained interested in a merger between BCHB and SBB.”
Fact #1 - Could not agree on price, one wanted to buy at RM4.25, the other wanted to sell at RM4.50, Goldman Sachs thought SBB was worth at least RM5.00 per share
Fact #2 - Enters Chua Ma Yu. Is he linked to CIMB? Not likely. How about MPlant, very likely. In fact, the entire Alliance Bank-Singapore connection rested on Chua's networking
Fact #3 - If SBB sells, it is likely be to Alliance Bank, it makes sense as one of the jewels in SBB is the asset management unit and decent amount of funds under management - complement Alliance Bank more than CIMB
Fact #4 - Nazir will try the backdoor, but it will only mean doing the deal at a price nearer to his own valuation. Does SBB have a real new suitor, if it does, shareholders/owners of SBB will be silly not to consider the new guy's offer first
Fact #5 - The new suitor knows what is on the table. There won't be a deal if the suitor won't pay close to RM4.50 per share at least. If it was RM4.25 or lower, many people will get blasted for not selling to CIMB. Plus with Singapore side backing, paying a bit more to do the deal won't be an issue with Alliance Bank
Fact #6 - SBB closed at RM3.98, investors should have thought it out a bit more, very likely will get RM4.50 a share very soon. Special situations/events trader should buy up SBB by the bulk
.... have a nice day!!!