Timing crucial in Affin’s bid to buy EON Cap

Thursday June 3, 2010



By YVONNE TAN

yvonne@thestar.com.my



PETALING JAYA: It remains unclear how much longer Bank Negara will take to decide whether to allow Affin Holdings Bhd to go ahead with its plan to acquire EON Capital Bhd (EON Cap).



The timing of the central bank’s decision is crucial in light of the existing RM5.06bil cash offer by Hong Leong Bank Bhd (HLB), which will soon be despatched to EON Cap shareholders.



When contacted, the central bank said it does not comment on specific issues relating to individual financial institutions.



After much speculation, Affin finally said on Monday that it had submitted a proposal to begin talks for the proposed buyout of EON Cap.



Affin, in its note to Bursa Malaysia, said it had submitted the application to the central bank on May 4, almost a month ago.



In contrast, it is understood that Bank Negara took two days to grant HLB the green light to commence negotiations with certain shareholders of EON Cap and about three weeks to start talks with the board of EON Cap.



A party familiar with the workings of the central bank, however, noted that all proposals had different levels of complexities and cannot be assessed using the same methods and time-frame.



The application to Bank Negara for approval is required pursuant to the Banking and Financial Institutions Act 1989.



Analysts noted that while Affin, being the second smallest banking group in the country, might not have sufficient financial muscle to undertake the deal on its own, it had shareholders with deep pockets, such as Lembaga Angkatan Tentera, which holds 32% stake in the bank, and Hong Kong’s Bank of East Asia, which owns 22%.



Both are said to be ready to back a rights issue by Affin to raise funds for the deal, should the acquisition go as planned.



Meanwhile, what is quite certain is HLB’s offer will be tabled to EON Cap shareholders at an EGM, which most expect to take place at the earliest by the end of next month.



At the market close yesterday, shares in Affin were down 1 sen to RM2.91 while HLB lost 4 sen to RM8.36. EON Cap shares finished flat at RM7.

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