WHAT NEXT???? AFFIN BANK???
Written by Yong Yen Nie
Friday, 02 April 2010 19:00
KUALA LUMPUR: EON CAPITAL BHD []'s (EONCap) board of directors will table to its shareholders HONG LEONG BANK BHD []’s proposal to acquire the former's assets and liabilities for RM5.06 billion cash or RM7.30 per share while also describing the offer as "credible".
In an announcement to Bursa Malaysia on Friday, April 2, EONCap said it had, on the same day, written to Hong Leong Bank to confirm that it agrees to implement the processes outlined in the offer.
“EON Capital wishes to announce that after having taken all steps to explore strategic options for the overall direction of the EON Capital Group, its board of directors is of the view that the offer is credible as a whole and should therefore be presented to EON Capital’s shareholders for their decision,” it said.
EONCap's board said it would table the offer for consideration and approval by its shareholders at a general meeting and submit applications to relevant authorities for their approval to execute the acceptance of the offer.
The board said it would also appoint an independent adviser to provide views on the fairness and reasonableness of the offer to EONCap shareholders.
Interestingly, EONCap said it had also written to Hong Leong Bank to consider, in addition to the proposed all-cash settlement, an option for settlement including some elements of equity in Hong Leong Bank.
While EONCap did not explain further on the issue, industry observers said EONCap could be proposing that Hong Leong Bank offer a deal that involves cash and shares of the merged banking group to its shareholders.
“For the avoidance of doubt, EON Capital will proceed with the implementation of the said processes independent of Hong Leong Bank’s response to such request,” it said.
It is understood that EONCap board had met on Friday to discuss on the Hong Leong Bank deal in detail. EONCap had sought suspension in trading at 2.30pm on the same day, pending of the announcement.
Hong Leong Bank revised its offer price of RM7.30 per share on Thursday from RM7.10 previously, based on EONCap’s shareholders fund of RM3.55 billion as at Dec 31, 2009 — slightly higher than the previous offer of 1.39 times.
The Edge Financial Daily learnt that EONCap’s new board had written to Hong Leong Bank on Wednesday to request for a higher price from the latter.
HLBB had returned with the same cash offer for EONCap’s assets and liabilities at RM4.92 billion that translated into RM7.10 per share. That price, which was first presented to EONCap in January, valued the targeted banking group at 1.39 times book value based on shareholders’ funds of RM3.55 billion as at Dec 31, 2009.
The revised Hong Leong Bank offer also came with several conditions, including one that says EONCap shall not declare, make or pay any dividends or other distributions or return capital to EONCap shareholders from the offer date until the date of completion of the transfer of the entire assets and liabilities to Hong Leong Bank. It added that if EONCap were to do so, the relevant amount would be deducted from the offer price.
However, the new terms are silent on the final tax-exempt dividend of 10 sen per share for the year ended Dec 31, 2009 announced on Feb 19, 2010. The previous terms specifically excluded the 10 sen dividend from being deducted from the offer price.
As such, it is not clear if the 10 sen dividend could possibly be offset against RM7.30 and thereby translating into an effective offer of RM7.20 per share.
In an announcement to Bursa Malaysia on Thursday, Hong Leong Bank required EONCap’s board to confirm on or before next Monday (April 5) that EONCap was agreeable to the conditions regarding the offer.
The conditions include EONCap agreeing to issue and despatch a notice of general meeting and shareholders’ circular in respect of the offer on or before April 30, 2010 or at an extended date which Hong Leong Bank and EONCap mutually agree on.
Hong Leong Bank had first offered to acquire EONCap’s assets and liabilities for RM7.10 per share in end-January. However, the offer was not tabled for EONCap shareholders’ approval, as the then EONCap board had deemed the price as too low and “significantly” undervalued the banking group.
However, EONCap major shareholder Rin Kei Mei and several other shareholders wanted the deal to go through and Rin asked Hong Leong Bank to retain its offer despite the board’s rejection. But, Hong Leong Bank said it was unable to consider the request, as it had “not been informed of any change in the board of EONCap’s position”.
EONCap saw several changes in its board thereafter, including the appointment of seven new independent directors and resignation of four independent directors - Datuk Dr Mohd Shahari Ahmad Jabar, Rodney Gordon Ward, Yeo Kar Peng and chairman Tan Sri Syed Anwar Jamalullail.