CIMB, RHB, MBSB receive nod from BNM to start merger discussions

Malaysia’s CIMB Group, RHB Capital and Malaysia Building Society (MBSB) said that it received the approval from Bank Negara Malaysia to commence discussions aimed at merging both RHB and CIMB, as well as creating an enlarged Islamic Banking franchise with MBSB.

Following the announcement, the three parties have entered into a 90-day exclusivity agreement to negotiate and finalise pricing, structure, and other relevant terms and conditions for a proposed merger of the three entities and the creation of a mega Islamic bank.

"We believe that there is inherent value and that there will be many opportunities which will arise from this proposed merger. We hope to explore this further through our discussions," said RHB Capital Group Managing Director Kellee Kam said in a statement today.

The exclusivity agreement comes with an automatic extension provision upon submission to Bank Negara Malaysia on the proposal.

"There is a prima facie case for a value-creating merger between the three entities and we want to get into detailed discussions to validate it," added CIMB Group Group Chief Executive Dato’ Sri Nazir Razak.

On the prospects of the creation of a mega Islamic bank, President and Chief Executive Officer of MBSB Dato’ Ahmad Zaini Othman said that the opportunity to be a part of a mega Islamic bank is ‘exciting’ and it intents to ‘take this forward.”

A combination of the three banks would create a group with total assets of RM597.3 billion at the end of last year, thus becoming the country’s largest banking group.

The three financial institutions suspended their trading on Bursa Malaysia today for the announcement and will resume on July 11, 2014.