EON Capital: Another Sad Day For Corporate Malaysia

From article on Star Business: EON Cap shareholders okay seven new directors

• Minority Shareholder Watchdog Group (MSWG) CEO Rita Benoy Bushon said there was a market perception that the newly elected directors were not truly independent because they were proposed by one major shareholder.
  
  However, she noted that the seven offered statutory declarations at the EGM as proof that they did not represent any of the major shareholders.
  
  “I’m not questioning whether the directors are independent, but I was not happy with the entire process,’’ she told StarBiz after the EGM.
  
  She observed that “the might and power of the majority shareholders” had swayed the outcome of the meeting.
  
  Bushon also said that based on the voting pattern, she had come to the conclusion the minorities may have voted against the resolutions.
  
  “It is a sad day for Corporate Malaysia ... a sad day for minority shareholders,’’ she said.

EonCap Gets Downgraded For Rejecting A Grossly Unfair Offer!

27th Jan 2009: MSWG says not a fair price, reject it

• “We believe EONCap has not fully expounded its value yet. Although the bank’s ROE (return on equity) is lower than (that of) other banks, we do not think it is doing very badly either. If you look at the company’s fundamentals, it has the potential to grow,” she told The Edge Financial Daily yesterday.
  
  Bushon said based on MSWG’s estimates, a fair price for EONCap shares would be between 1.6 and 1.7 times book value.
  
  Based on the latest quarterly results where EONCap’s shareholders funds amounted to RM3.49 billion, a valuation of 1.6 times book would translate to about RM8 per share.
  
  “If you look at acquisitions involving banks in recent years, it ranges between 1.3 times and two times book value. But, what HLBB has offered to pay is at the low end of the scale, which we do not agree with,” she said.
  
  Bushon also voiced her dissatisfaction over the mode of takeover adopted by HLBB.
  
  HLBB is proposing to acquire the assets and liabilities of EONCap under the Companies Act which requires approval of only 50% plus one vote as opposed to the Takeover Code which requires 90% shareholder acceptance.
  
  Bushon said HLBB’s attempt to take over EONCap via acquisition of its assets and liabilities was unfair to the latter’s minority shareholders.
  
  She said the fact that HLBB did not want to get all of EONCap’s shareholders’ approval for its takeover attempt was a negative development for the minority shareholders.
  
  “We think that this is oppression against the minority shareholders, as we believe they are not getting a fair deal out of this takeover,” she said.

I fully agree one hundred percent that it wasn't fair and I was very happy to read that since then EonCap has rejected the offer.

However, I was more than displeased to read the following article. EONCap gets thumbs down from analysts

Thumbs down because the company rejected a lousy and grossly under-valued offer from HLBB?

Sigh!

Here's some of the so-called comments posted...

• OSK Research downgraded EONCap’s fair value to RM6.60 following the lapse of HLBB’s offer and the absence of credible bids, but maintained its neutral call on the stock, while Maybank Investment Bank Research downgraded its buy call to a hold but kept its RM7.20 target price.
  
  AmResearch also downgraded the stock, to a sell from hold, with a revised fair value of RM5.50 a share.
  
  HwangDBS Vickers Research, however, maintained its hold and RM7.10 target price, given that HLBB’s bid could still go through if shareholders requisitioned an EGM to vote against the board’s decision not to table the offer to shareholders, as speculated in the market.
  
  “Assuming bets are still on, EONCap could still trade close to HLBB’s proposed offer price of RM7.10 if shareholders push for an EGM. If the shareholders fail, EONCap’s share price could correct to its fundamental value of RM6.30, in our opinion,” the research house said.
  
  To recap, HLBB had made a RM4.92 billion, all cash, offer to take over EONCap’s assets and liabilities, in a deal that could turned them into the country’s fourth largest bank, in terms of assets.

Heavenly deal between Primus and Eon Capital?

Published on The Edge Weekly edition. 18 Feb 2008: Big Money: What's Primus up to at EON Capital?

• 18 Feb 2008: Big Money: What's Primus up to at EON Capital?
  By P Gunasegaram
  
  What is it in EON Capital that makes Primus Pacific Partners pay a hefty RM9.55 a share, a near 60% premium on its trading price, to gain a non-controlling one-fifth of the bank and financial services holding company for a hefty RM1.34 billion?
  
  And importantly too, why is it that other shareholders, apart from DRB-Hicom, which sold that stake to Primus, don't get to participate in that largesse? Is it right that a strategic shareholder, if Primus is one, pay a premium price to one particular shareholder, who happens to be a key shareholder for all intents and purposes, and is not required to make an offer to other shareholders on the same terms?
  
  However, such premium prices for small stakes are not unheard-of in Malaysia. Ironically, control of DRB-Hicom itself, the vendor in this instance, passed to tycoon Tan Sri Syed Mokhtar Al-Bukhary who only had to gain control of a mere 15.8% stake to be vested with management control.
  
  But he paid a hefty RM3.60 a share, a 64% premium on market prices then, in a deal worth RM560 million, announced in 2004 and completed after some complications in 2005 with government support. The stake came from the estate of the late founder of the DRB-Hicom group, Tan Sri Yahya Ahmad, who died in a helicopter crash in the late 1990s.
  
  Syed Mokhtar has since consolidated his hold on the DRB-Hicom group by injecting his own assets in return for shares.
  
  Primus however denies, almost vehemently, that it has management control but is making very forward-looking remarks about how value can be created, how it should be done, and mentioning that it will seek to help the EON Cap board in these respects.
  
  Yes, on paper at least, Primus does not gain management control but it is clear that it intends to influence existing management in a substantial way. To quote Primus managing director Jeroen Nieuwkoop: "We want to support the management team in developing a detailed business plan that outlines the opportunities for expansion and value creation."
  
  But then Nieuwkoop added, and we quote: "We are investors and not managers, and we do not want to step into the management's shoes. We leave that to Albert Lau (CEO of EON Bank) and his team."
  
  He said further that he had met the other shareholders and that there was no issue with them. Reports said that Primus executives had met Rin Kin Mei @ Rin Kei Mei, currently said to be the key person at EON Bank, EON Cap's main unit.
  
  Rin reportedly holds 15.4% in EON Cap, which together with Primus' stake of 20.2%, makes it 35.6%. Rimbunan Hijau group chief Tan Sri Tiong Kiew King has 17.1%, Khazanah Nasional Bhd, 10%, and the Employees Provident Fund, 5.3%.
  
  While it may not be officially in control, Primus certainly seems to be making announcements, which should rightly be coming from the board of EON Cap, for instance, the business plan, although Nieuwkoop says that EON Bank will release it.
  
  At the very least, that must mean that Primus must have had a lot of engagement with the board and existing management at EON Bank. And if it pays a 60% premium, it must have some amount of confidence that it will have at least some of its ways with EON Bank.
  
  Otherwise, why risk it, especially when you can take stakes in a number of local financial institutions if you think the Malaysian financial sector is so vibrant instead of putting all your eggs in one little basket for a huge price?
  
  And who is Primus anyway and how can it contribute? What expertise has it in running or helping to run a bank?
  
  At a press luncheon recently, Nieukwoop refused to even give out name cards and declined subsequent emailed questions to their local public relations agency by this newspaper. He did not disclose Primus' fund size or elaborate on its shareholders. He only said they comprised Middle Eastern investors, Asian families, and investors from other parts of the world.
  
  Very little information is available on Primus anywhere. Reportedly, Primus, set up in 2005, invests primarily in financial services companies. The EON Cap stake is its second investment after New China Life.
  
  The question that arises is, should such a fund be allowed to take a significant stake in a local bank and permitted to have such a strong influence, although not outright control, over management?
  
  It is high time the authorities took a more serious view of small stakes of less than the 33% trigger level changing hands at huge premiums on market prices, while significant management and directional changes take place behind the scenes. And there have been many such situations in Malaysia.
  
  Permitting some shareholders to benefit and exit from a listed company with a high price without the same benefit to all other shareholders is inherently unfair and smacks of insider dealings, which are unhealthy for the development of an equitable equity market.That's a situation that must not continue.

Do you agree with what's said?

*****************

Recommended commentary made by Salvatore_Dali

http://malaysiafinance.blogspot.com/2008/02/primus-pleases-itself-moolah-said-what.html

Update on EonCapital

On Tuesday, I blogged the following : EonCap Merger?

And I made the following remarks:

And guess what today, Business Times continued with the story yet again. (Why?)

• EON Capital enters the fray for RHB CapThe Utama Banking Group board is due to meet by as early as today to consider the EON Capital bid said to be in concert with the Employees Provident Fund, sources say

The mighty sources strikes again! Crikey!

• EON Capital enters the fray for RHB Cap
  By Francis Fernandezbt@nstp.com.my
  February 6 2007
  EVEN as suitor Kuwait Finance House (KFH) unravelled its bid yesterday for RHB Capital Bhd, the country's fourth largest financial group, a new party, EON Capital Bhd, was said by some sources to be preparing to join in the fray.

Last night, EonCapital comfirmed this story and that they have made a bid for RHB Capital.

Ah, finally for once, the source of the story became story.

But...

How and who leaked the story to the press?

Is this what they call Insider Info?

Hmmm....

Update on EON Capital Merger

This morning I wrote about this : EonCap Merger?

Well, here is the first denial.

Article Entitled " EPF eyeing DRB-HICOM's stake in EON Capital"

• Subject : Article Entitled " EPF eyeing DRB-HICOM's stake in EON Capital"
  
  Contents :
  
  We refer to the query from Bursa Malaysia Securities Berhad dated 5 February 2007 on the above article published in the New Straits Times, Business Times section on 3 February 2007.
  
  We wish to inform that DRB-HICOM Berhad has announced on 6 February 2007 that the company is not in negotiation with EPF as stated in the above article.

Again?

Are you shocked that the article has been denied?

Let me ask you the productivity issue. Them folks at EON Capital nothing else to do than to reply to all these queries based on sources.

Btw Singapore Business Times carried the following article: source to article

• EON Capital poised to join race for RHB
  Two proposals from foreign suitors already under consideration
  
  By S JAYASANKARAN
  IN KUALA LUMPUR
  
  THE race to grab control of RHB Capital, Malaysia's fourth largest lender, may get even more crowded with the entry of yet another suitor.
  
  Mr Daim: He's advising international investment agency Primus Pacific Partners, one of the bidders
  Bankers familiar with the matter said EON Capital, the country's seventh largest bank, is poised to enter the fray.
  
  It isn't clear if EON has received permission from the central bank to commence negotiations with any of RHB Capital's shareholders - a requirement of Malaysian law - but that may not be difficult.
  
  Late last year, the central bank relaxed rules on bank takeovers allowing owners to negotiate simultaneously with multiple would-be partners.
  
  The multiplicity of suitors for RHB's banking services underscores the new, market driven approach preferred by the central bank to consolidate Malaysia's banking sector. And it means that RHB's shareholders could exit with the best possible price.
  
  The RHB group is now considering two separate proposals from foreign suitors.
  
  The two: Kuwait Finance House's proposal to buy Utama Banking Group's 32 per cent in RHB and a slightly more complicated offer by international investment agency Primus Pacific Partners to buy into RHB.
  
  Primus shareholders Qatar Investment Agency and the Tsai family of Taiwan are being advised in Malaysia by former finance minister Daim Zainuddin.
  
  All this is complicated by the indebtedness of the group. RHB, a financial services company, holds 65 per cent in listed RHB Capital which, in turn, holds 70 per cent of RHB Bank. But RHB itself is indebted to the tune of RM3.5 billion (S$1.6 billion), with close to RM1 billion of that due this June.
  
  The debt has to be resolved, which was why RHB's board announced a plan last week to sell its stake in RHB Capital back to shareholders in proportion to their holdings in RHB. If implemented, the plan would have raised RM3.6 billion, which could have ended the firm's debt while allowing RHB's shareholders direct exposure to the actual cash-generating unit in the group.
  
  RHB's shareholders include the Sarawak-based Utama Banking Group (32 per cent), the EPF or the Employees Provident Fund (30 per cent) and a government pension fund (10 per cent). Of the three shareholders, only Utama is talking to the foreign bidders, while the state agencies want to go ahead with the sale of RHB's stake in RHB Capital.
  
  Enter EON Capital. The bank has a clean balance sheet but is itself a takeover target because of its relatively small size. That is why EON has tried taking over other mid-size banks; its previous attempt to takeover AMMB Holdings in 2004 failed over price.
  
  The bankers said that in September last year, EON Capital proposed to take over RHB Capital through a voluntary general offer. According to them, the finance ministry was keen on the idea but the EPF balked and the proposal went nowhere. But with two foreign parties bidding for RHB, the bankers said that the EPF may have now warmed up to EON Capital's proposal. One reason is the state-owned nexus running between both the banks.
  
  RHB Bank, the group's unlisted bank, is 30 per cent owned by state investment agency Khazanah Nasional, which also has a near 20 per cent interest in EON Capital. The commonality of state interests in both banks could prompt the government to lean towards EON Capital.
  
  Meanwhile, although EON Capital is smaller than RHB Capital, its clean, almost debt free balance sheet allows it to gear up to make a takeover possible, the bankers said.
  
  They added that the EON Capital bid could also be preferred because it avoids the complications of the Kuwait Finance House offer, which is said to be more generous than the bid by Primus.
  
  The Kuwaiti bid is only for the Islamic banking portions of RHB, which means its conventional banking parts would have to be hived off. This, the bankers said, could be potentially embarrassing for the Muslim-dominated Malaysian government as it could see the EPF, say, buying back RHB's conventional banking processes while selling its Islamic banking business.
  

EonCap Merger?

Them sources will never die will they? Not especially in a hot market.

This was reported on Business Times on 3rd Feb 2007.

• EPF eyeing DRB-HICOM's stake in EON Capital
  By Francis Fernandez
  bt@nstp.com.my
  February 3 2007
  
  THE Employees Provident Fund (EPF) is considering making a formal proposal to acquire DRB-HICOM Bhd's stake in EON Capital Bhd for about RM9.50 a share, executives familiar with the matter said yesterday.
  
  Business Times was told the provident fund had in the past two months held informal talks with DRB's dominant shareholder, Tan Sri Syed Mokhtar Al-Bukhary, at the shareholder level to facilitate the sale. DRB is the single largest shareholder in EON Capital with a 20.2 per cent stake in the lender.

Yesterday, OSK had a report based on the article. LOL!! Don't you wonder why the need for them to do so? Well, you do have consider the issue of the countless times when all these news based on sources were denied by all parties concerned!

Have a look at the following snippet of what OSK wrote.

• Merger Of The Two “Caps”?
  It was speculated in an article over the weekend that EPF could be the latest suitor for DRBHCOM’s 20%-stake in EONCAP with a higher offer price of RM9.50/share. According to the report, EPF could then merge both EONCAP and RHBCAP. Pending any further details, we are maintaining our BUY call and target price of RM7.90 on EONCAP. Meanwhile, we are of the opinion that the recent reported
  offer prices of between RM9.00 and RM9.50/share are not impossible and would revise our target price should the M&A news flow become more tangible.

Ironic cause OSK themselves acknowledged it's mere speculation!!

And guess what today, Business Times continued with the story yet again. (Why?)

• EON Capital enters the fray for RHB Cap
  The Utama Banking Group board is due to meet by as early as today to consider the EON Capital bid said to be in concert with the Employees Provident Fund, sources say

The mighty sources strikes again! Crikey!

• EON Capital enters the fray for RHB Cap
  By Francis Fernandez
  bt@nstp.com.my
  
  February 6 2007
  
  EVEN as suitor Kuwait Finance House (KFH) unravelled its bid yesterday for RHB Capital Bhd, the country's fourth largest financial group, a new party, EON Capital Bhd, was said by some sources to be preparing to join in the fray.

And to refresh everyone's memory, I had just blogged on EonCapital recently. See As Expected: EON Capital!

How?

You buy these sources stories?

Do you?

Really?

As Expected: EON Capital

Blogged on Eon Capital on Saturday.

And as expected:

• Subject : Articles Entitled : "Foreign suitor for EON Cap" and "US investment bank is expected to acquire EONCAP at RM9.35 per share"
  
  Contents :
  
  We refer to the query from Bursa Malaysia Securities Berhad dated 22 January 2007 on the above articles published in the Star, Bizweek Section and Nanyang Siang Pau, Business Section on 20 January 2007.
  
  We wish to inform that the Company is not aware of any such plans as stated in the article published in the Star, Bizweek Section.
  
  With regard to the article appearing in Nanyang Siang Pau, Business Section, we wish to inform that the Company is not aware of any United States-based investment bank's interest in acquiring the Company.

Well?

As expected, wasn't it?

Eon Capital

Saw this article published on Star Bizweek.

Foreign suitor for EON Cap
US’ GE unit is said to have started negotiations to take over EON capital

It is believed that a financial group under US-based General Electric Co banner has initiated talks with the controlling shareholder of DRB Hicom, Tan Sri Syed Mokhtar Albukhary, to acquire the group’s 20.2% equity the conglomerate holds in EON Capital.
General Electric has a wholly-owned unit General Electric Capital Services Inc, which is involved in the financial services and insurance business, and under this umbrella there are several other companies which could initiate negotiations.
It is further understood that the price being bandied could be in the region of RM9 per share for the 140-odd million shares, which are owned by DRB-Hicom.
The offer price represents a stark premium to EON Capital’s close on Thursday of RM7.05.
Analysts say the premium could be due to the shares being the controlling block and a high price tag laid by Syed Mokhtar. As at end September last year, EON Capital had a net tangible asset per share of about RM4.29.
Industry sources say the tycoon had placed a price tag of RM9 for the shares, which had put off many buyers previously.

What say you?

Again, I find it incredible that our financial news media is able to obtain such sources of news.

And I wonder if EON Capital will deny the story.

Look at all the recent trend of events.

News media published news based on sources, stock goes up, company gets querried by SC, company denies, stock goes down.

Nice trend, eh?

Somehow, i wonder why our newsmedia aren't getting querried at all.

Don't you ever wonder?