KUALA LUMPUR: Malaysia's EON Capital said on Friday it has accepted a $1.7 billion takeover bid by rival Hong Leong Bank, capping a 16-month courtship that would create the country's fourth-largest bank by assets.
Malaysian banks are facing growing pressure to consolidate as they seek the size to tap Asian markets. Maybank and CIMB, Malaysia's top two lenders, have expanded to Brunei, Indonesia, Thailand and Cambodia in the search for new markets.
EON said in a stock exchange filing that "after due consideration, the board of EON Capital confirmed to Hong Leong Bank to accept the offer to sell the entire assets and liabilities of EON Capital at the offer price based on the terms and conditions" Hong Leong set out in April 2010.
The acceptance comes after a Malaysian court on Thursday dismissed a lawsuit filed by EON Capital shareholder, Primus Pacific Partners, which was trying to block Hong Leong Bank's bid. Primus said the Hong Leong offer was too low.
In addition to the possibility the ruling could be reversed on appeal, another potential suitor, China Construction Bank, has approached the Malaysian government about buying a stake in EON, a source with direct knowledge of the plan told Reuters on Monday.
"I hope it is a done deal. This has been a distraction for the shareholders and management of Hong Leong," said Jalil Rasheed, head of equities at Aberdeen Asset Management Malaysia, which owns Hong Leong shares.
"Hong Leong has never made it a secret that they want to expand regionally, but I always wondered whether this distraction over EON Capital has made it difficult for them to focus on their ambition."
Hong Leong's acquisition of EON Capital would create the country's fourth-largest banking group by assets at a time when lenders are seeking to boost their size to gain regional market share.
As part of the deal EON agreed on Friday, Hong Leong will have to allow EON Bank to pay a 312 million ringgit ($105.2 million) dividend when EON receives approval from the central bank. The dividend would not be deducted from the offer price of 5.1 billion ringgit.
Hong Leong said it has agreed to both conditions.
EON Capital's acceptance is expected to conclude the fight for Malaysia's seventh-largest lender by assets, which has been marked by the Primus legal battle.
Primus will appeal against the court ruling, EON said. The deal has already received shareholder and regulatory approval and the court's decision Thursday was the final hurdle before the April 30 deadline Hong Leong had set previously.
Primus, which owns a fifth of EON, filed the suit against certain EON shareholders and directors in June last year, alleging they agreed to sell the bank at too low a price.
The Hong Kong-based private equity firm paid 9.55 ringgit per share for its 20 percent investment in EON in 2008, while Hong Leong has offered 7.30 ringgit per share for EON's assets.
EON's strength in the retail lending business, particularly to the vehicle hire purchase sector, would bolster Hong Leong's operations while the financial group presses ahead with its regional expansion.
There has been speculation that other mergers are on the cards including a union between RHB Capital and AMMB, the country's fourth and fifth-largest lenders by assets, respectively.
EON Capital's shares last traded at 7.23 ringgit before they were halted pending the announcement. Hong Leong shares last traded at 10.32 ringgit before they too were halted.
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