The board of EON Capital Bhd (EON Cap) has accepted the RM5.06bil takeover bid by Hong Leong Bank Bhd (HLB), capping a 16-month battle to create the country's fourth-largest bank by assets. It also proposed a surprise net interim dividend of RM312mil, or 45 sen per share, in addition to the offer price.
“The directors intend to manage this transaction in a manner that is fair and equitable to all parties concerned ... The additional interim dividend payment is in addition to the offer price of RM5.06bil and was secured after much negotiation with Hong Leong Bank ...,” said EON Cap chairman Gooi Hoe Soon in a statement.
The announcement came a day after the court ruled in favour of EON Cap and stopped EON Cap's largest shareholder Primus Pacific Partners Ltd's attempt to block the sale and a day before HLB's offer expires.
In a separate announcement, EON Cap said Primus had served the company's solicitors a notice of appeal, appealing the court decision. No date has been fixed for the appeal, which was largely expected by market observers.
OSK Research said the net interim dividend translated into a generous payout ratio of 46%. The research house said the earlier condition set by HLB had prevented EON Cap from paying or declaring any dividends from the offer date to the deal completion.
“The new waiver allowing such a payment indirectly raises the offer price for EON Cap to RM7.75 from RM7.30 (per share) previously,” said OSK, adding that it expected EON Cap's share price to trade upward to just under RM7.75 to reflect the 45 sen net interim dividend. Shares in EON Cap, which was suspended from trading yesterday, last traded at RM7.23.
However, OSK said the 6% increase in the offer price for EON Cap arising from the dividend payout was still lower than the 11% increase in EON Cap book value for the past one year.
AmResearch said the proposed dividend did not change its valuation for HLB post-merger with EON Cap which stood at at least RM14.10 a share. On the other hand, it said, it could potentially reduce EON Cap's book value, which means HLB's acquisition price-over-book value would be 1.4 times instead of 1.3 times.
In the announcement to Bursa, EON Cap also said that HLB had acknowledged that the net liabilities at EON Cap at company level shall not exceed RM14.1mil as at the offer's completion date.
“HLB is viewed as one of the country's leading banking groups and given its regional presence, EON Cap believes all stakeholders will be well-served by this move, which will see the enlarged entity not only become a larger banking group with total assets in excess of RM140bil but shall also be a stronger force in the regional banking arena,” said Gooi.
He said the move was also in line with the ongoing consolidation of the country's banking industry and that the boards of both banks would collaborate to achieve a successful transition.
He said EON Cap's solid foundation had been built on developing close relationships with its employees and customers, coupled with in-depth knowledge of the local market and core business segments.
“Our performance, particularly in recent years, has been due to the integrated effort of a strong team of people who have done good work for the bank. We are also making every effort to ensure that the transition will have minimum impact on our employees and customers by making it as smooth as possible,” he added.
Primus, via its local unit Primus (M) Sdn Bhd, had filed the suit under Section 181 of the Companies' Act as it believed that EON Cap's new directors did not act in the best interests of the bank when they agreed to table HLB's offer of RM7.30 per share to shareholders.
The petitioner sued the respondents for RM1.11bil in damages.
Primus had objected to the sale as it believed the price offered by HLB was “too low”.
Primus had paid RM9.55 per share for its 20.2% stake in EON Cap in 2007 and a sale of the stake to HLB at RM7.30 would crystallise its losses.
HLB's first offer to buy EON Cap at RM7.10 per share had been rejected by a previous board.
A new board was then established presumably so that a new offer by HLB could get through, observers said then.
