Stock Name: EONCAP
Company Name: EON CAPITAL BHD
Research House: MAYBANK
EON Capital Bhd (EONCap)
(April 2, RM7.13)
Maintain hold at RM7.05 with target price of RM7.20: Hong Leong Bank Bhd's (HLBB) revised offer values EONCap at 1.42 times book based on RM5.13 book value of equity per share as at December 2009; still at the lower end of recent banking mergers and acquisitions (M&A).
HLBB's terms are also very restrictive in terms of deadline, to avoid having to comply with the new guidelines on asset disposal.
We expect EONCap's new board of directors to agree with a shareholders' EGM. The sale is almost a foregone conclusion as it requires only 50%-plus-one-share vote. Minorities will have little say.
Last Thursday, HLBB revised its offer to buy the entire assets and liabilities of EONCap for RM5.06 billion cash or at RM7.30 per share. This is a mere 2.8% above the revived offer of RM4.92 billion or RM7.10 per share made on March 30, where the offer price was unchanged from the original offer made on Jan 21. The revised offer price is also a mere 3.5% premium over EONCap's last Thursday's closing share price.
The offer price is subject to a due diligence on EONCap. EONCap's board of directors has until today to confirm with HLBB that it agrees to submit its application for authorities' approval on or before April 19, and issue a notice of shareholders' EGM on or before April 30, and for the EGM be held not later than 14 days from despatch date of the notice. Also, the completion date for the exercise is not later than May 31. There are other conditions, amongst which EONCap must not entertain, pursue or negotiate with any other parties on similar subject matter and HLBB can withdraw its offer if there is a new guideline or law which affects its offer.
With a completion deadline set for May 31, it is obvious that the speed is to avoid the exercise having to fall within the ambit of the Securities Commission's new guidelines on asset disposal which are up for public comments by April 9, and which may be effective as early as June.
The revised offer price still values EONCap at the lower end of recent domestic banking M&A which averaged 1.7 times their historical book values.
We think that the new offer price is still low considering that it is for the business in entirety. The deal requires only the go ahead of shareholders who hold 50%+one share of EONCap, and will go through if Tan Sri Tiong Hiew King (17.1%), Rin Kei Mei (15.5%), Employee Provident Fund (12%) and Khazanah Nasional Bhd (10%), who hold a total 54.6% agree to sell.
We expect EONCap's new board to accept HLBB's terms. - Maybank IB, April 2
This article appeared in The Edge Financial Daily, April 5, 2010.
Company Name: EON CAPITAL BHD
Research House: MAYBANK
EON Capital Bhd (EONCap)
(April 2, RM7.13)
Maintain hold at RM7.05 with target price of RM7.20: Hong Leong Bank Bhd's (HLBB) revised offer values EONCap at 1.42 times book based on RM5.13 book value of equity per share as at December 2009; still at the lower end of recent banking mergers and acquisitions (M&A).
HLBB's terms are also very restrictive in terms of deadline, to avoid having to comply with the new guidelines on asset disposal.
We expect EONCap's new board of directors to agree with a shareholders' EGM. The sale is almost a foregone conclusion as it requires only 50%-plus-one-share vote. Minorities will have little say.
Last Thursday, HLBB revised its offer to buy the entire assets and liabilities of EONCap for RM5.06 billion cash or at RM7.30 per share. This is a mere 2.8% above the revived offer of RM4.92 billion or RM7.10 per share made on March 30, where the offer price was unchanged from the original offer made on Jan 21. The revised offer price is also a mere 3.5% premium over EONCap's last Thursday's closing share price.
The offer price is subject to a due diligence on EONCap. EONCap's board of directors has until today to confirm with HLBB that it agrees to submit its application for authorities' approval on or before April 19, and issue a notice of shareholders' EGM on or before April 30, and for the EGM be held not later than 14 days from despatch date of the notice. Also, the completion date for the exercise is not later than May 31. There are other conditions, amongst which EONCap must not entertain, pursue or negotiate with any other parties on similar subject matter and HLBB can withdraw its offer if there is a new guideline or law which affects its offer.
With a completion deadline set for May 31, it is obvious that the speed is to avoid the exercise having to fall within the ambit of the Securities Commission's new guidelines on asset disposal which are up for public comments by April 9, and which may be effective as early as June.
The revised offer price still values EONCap at the lower end of recent domestic banking M&A which averaged 1.7 times their historical book values.
We think that the new offer price is still low considering that it is for the business in entirety. The deal requires only the go ahead of shareholders who hold 50%+one share of EONCap, and will go through if Tan Sri Tiong Hiew King (17.1%), Rin Kei Mei (15.5%), Employee Provident Fund (12%) and Khazanah Nasional Bhd (10%), who hold a total 54.6% agree to sell.
We expect EONCap's new board to accept HLBB's terms. - Maybank IB, April 2
This article appeared in The Edge Financial Daily, April 5, 2010.
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