Posts tagged M+A

Japanese M&A activity and FDI grows in Malaysia

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More companies listed on the Bursa Malaysia (Malaysian stock market) are potential acquisition targets for Japanese companies as investment continues to flow in, thanks to a strong yen and a geographic diversification drive gathers pace in Japan.

The momentum was already underway before Japan’s 11 March 2011 disasters highlighted the need for more offshore activity. Between January 2009 and July 2011 Japan was involved in 513 M&A deals worth US$14.2 billion in emerging Asia, reports The Edge Malaysia. This figure includes Chinese and Indian deals as well as those in Malaysia and Indonesia.

Focusing on Malaysia alone, however, Japanese FDI rose 537% year on year in 2010 (compared to 109% in other Southeast Asia), accounting for 12% of all foreign direct investment inflow. Japan was involved in 34% of Malaysian M&A activity.

But this activity might not be what you’d expect from Japanese deals, and is certainly different to those of the previous two decades. UOB Kay Hian Malaysia Research said it’s not the electronics and electrical sector attracting Japanese interest this time. Instead, the Japanese are looking at logistics, financial, healthcare and consumer industries, as well as heavier industries where Malaysia offers a better deal on energy and logistics costs. The research house said Japanese companies were also prepared to pay more for greater control of their acquisitions, like Asahi Group’s purchase of Malaysian bottler Permanis, and Mitsui & Co’s 30% stake in Integrated Healthcare Holdings. Companies that already trade with Japanese firms are seen as more attractive.

source & article: The Edge Malaysia

Merger to create new Malaysian oilfields giant

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Another Malaysian petroeum giant is set to emerge, with SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd announcing a RM11.9 billion (US$3.9 billion) merger plan to form Malaysia’s largest oilfields services provider by assets. The move is bound to please the government, coming just half a year after Prime Minister Najib Razak revealed incentives to explore less profitable oilfields, and the two companies jointly received a contract from government-linked Petronas to develop an eastern field in partnership with Petrofac Ltd.

The merger was orchestrated by Integral Key Sdn, a company set up especially to handle the merger by a unit of Malayan Banking Bhd (Maybank). The company made a bid of RM4.60 per share in stock and cash for SapuraCrest and the equivalent of RM3 per share for Kencana. The merged company would have around RM6 billion ($1.98 billion) in assets and would grow from there thanks to an increased ability to handle larger and more complex projects.

Integral’s offer, which is valid until 15 August 2011, is a 2.4% premium on SapuraCrest’s 8 July share price of RM4.49 and a 7.1% premium on Kencana’s RM2.80. SapuraCrest’s share price rose 0.7% to RM4.92 on the news and Kencana’s jumped 3.9% to RM2.91. Bloomberg reports the new entity would have a market cap of RM11.1 billion ($3.66 billion) based on current prices, making it Malaysia’s second largest company of its type by market cap (after Malaysia Marine and Heavy Engineering Bhd) but the largest by assets.

Analysts say the two companies are a good fit. SapuraCrest operates drilling rigs, installing pipelines and developing oil and gas fields, while Kencana is in the engineering and fabrication business. The merger is expected to prompt other smaller players into tie-ups, and the government’s offer of development investives still stands.

source & article: Bloomberg

Malaysian merger competition could produce SEA’s largest bank

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Malaysia’s two largest banks, Maybank and CIMB, are suiting up to duel for a merger with RHB capital, which could result in a US$6.7 billion deal and one of Southeast Asia’s largest banking groups. According to this report from Reuters, competition has caused compressed net interest margins (what a bank takes in from loans and pays out in deposits) and no less than Prime Minister Najib Razak himself has called for Malaysia to create ‘regional banking champions’ to boost investment. This all seems to point in one direction: a round of Malaysian bank consolidation, starting here.

Maybank and CIMB were given permission by Bank Negara Malaysia to begin three months of merger negotiations starting 31 May. Should Maybank succeed it would create Southeast Asia’s largest bank by market value, though a CIMB-RHB merger would rank second below DBS.

The news comes as no great surprise, given the Malaysian government’s overt support for mergers and rumors of the Big Two’s interest in RHB since Abu Dhabi Commercial Bank announced it was selling its 25% share in March. Japan’s Sumitomo Mitsui Financial Group and the US-based private equity firm Carlyle group had also expressed interest in buying. Whoever succeeds will be required by law to negotiate to purchase another 45% in RHB, currently held by the Employees Provident Fund (EPF).

UPDATE: in the midst of all this, RHB is still pushing ahead with its own expansion plans, possibly looking at medium-to-large acquisitions in Thailand. It has just launched a RHB branch in Bangkok and has already acquired small Indonesian lender Bank Mestika.

source & article: Reuters

Maybank wants larger share of global sukuk sales

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Malaysia’s biggest lender Malayan Banking Bhd (Maybank) hopes its recent acquisition of Kim Eng Holdings Ltd will strengthen its position in sukuk (Islamic bond) underwriting, after its share slipped from world’s second largest to fourth.

This was despite global sukuk sales growing 37% to US$6.7 billion on the back of economic recovery and growth in Asia and the Persian Gulf. Sales in Malaysia alone grew 51% to $4 billion. Maybank currently has a 9% share in the global market and dominates Malaysia’s 10-year dollar-denominated sukuk issuances, but has been restricted to local business and will need Kim Eng’s international reach to challenge larger players for the top spot, currently held by HSBC Holdings Plc with 24%. Malaysia’s CIMB took second place with 21%, and Standard Chartered Plc third with 13%.

Securities and investment banking group Kim Eng Holdings Ltd has offices in Malaysia, Hong Kong, Thailand, the Philippines, India, Vietnam, London, and New York. Maybank completed a 44.6% acquisition on 10 May this year for S$798 million (US$639 million).

The industry is hoping for a bright future in Malaysia and abroad, with US$444 billion in local economic development projects due to begin soon, and several Malaysian companies expected to begin refinancing later this year. Indonesian local currency issuances have been increasing as well, reaching Rp27.76 trillion ($3.24 billion) in 2010 and Rp17.94 trillion ($2.1 billion) so far this year. According to Bloomberg data, there is $59.3 billion worth of sukuk outstanding worldwide, with around $7.97 billion set to mature in 2012.

source & article: Business Times

Japanese banking giant makes bid for 25% of RHB Capital

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We’re seeing more interest from Japanese companies in Southeast Asian assets. Yesterday Japan’s second largest bank (by market cap) Sumitomo Mitsui Financial Group Inc made a bid for a 25% share of Malaysia’s fourth largest (by assets) RHB Capital Bhd.

Business Times reports that the Carlyle Group, a US private equity firm, has also put in an offer. The 25% currently belongs to Abu Dhabi Commercial Bank PJSC, which is looking to sell. The news took RHB Capital’s share price up 2.4% to a 14-year high, valuing the 25% stake at RM5 billion (US$1.66 billion).

While Japan’s recent disasters and subsequent economic downturn have sparked a new interest in overseas investments, Japan’s large corporations were already keen to move into Southeast Asia before the events, facing competition from their Chinese and South Korean counterparts. Takeda Pharmaceutical Co. and Toshiba Corp also announced yesterday a combined $16 billion in overseas takeovers. Mitsui Sumitomo Insurance Corp bought 50% of Indonesia’s PT Sinar Mas Multiarta this month for $820 million, while Mitsui & Co trading company grabbed a 30% share of Malaysia’s Integrated Healthcare Holdings for RM3.3 billion ($1.09 billion).

source & article: Business Times

Qatar Islamic Bank looking for Indonesian acquisition

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Qatar Islamic Bank is looking for an acquisition candidate in Indonesia, keen to hit the ground running in a competitive market with an already-established corporate and retail operation in the world’s largest Muslim market.

No decision or short-list has been announced publicly yet. Indonesia has 11 Islamic banks and is seen as the sector’s next big growth market, with shariah banking assets expected to triple to Rp130 trillion by the end of 2011. The Asian Finance bank, 62% owned by Qatar, says it is keen to use Indonesia as a springboard to pan-Asian operations, even looking to markets like South Korea for Islamic finance opportunities. South Korea has recently altered regulations to accommodate the alternative to ‘mainstream’ finance, while Indonesia has taken similar steps such as proposing tax incentives to stimulate sukuk (Islamic bonds) issuance.

source & article: TradeArabia

Maybank’s next move is Thailand: analysts

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Maybank won’t stop with its intended acquisition of broker Kim Eng, according to analysts, and will likely continue its march into Southeast Asia by buying a Thai bank sometime soon.

Analysts from HwangDBS Vickers Research and RHB Research said a commercial bank in Thailand would be the next “obvious move” for Maybank since it has no current presence there, but the company will need to spend some time looking for potential targets. Although Maybank’s management have denied any further M&A plans in the next 12 months, it has commercial operations in all surrounding countries and Thailand’s huge market represents a glaring gap in its plans to spread throughout Southeast Asia.

Kim Eng is Thailand’s number one broker, with 41 branches. Maybank’s ability to acquire 100% of the company as planned is still uncertain, but it would be a big step towards establishing itself as an investment bank and equities trader in the region. Reactions to the news have been positive so far, with Kim Eng’s shares hitting a record high of S$3.04, just below Maybank’s offer of S$3.10.

source & article: Business Times

Real estate to dominate Singapore M&A activity in 2011

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M&A activity in Singapore almost doubled that of 2009 in value, with US$40.7 billion worth of deals taking place. That value is expected to continue increasing in 2011, dominated by expansion of the real estate sector.

Not only that, but the number of outbound Singapore acquisitions increased more than 500% on last year, amounting to $23 billion worth. The figure includes the Singapore Exchange’s (SGX) proposed acquisition of the Australian Securities Exchange (ASX), worth $8 billion. Australia and Hong Kong were the biggest destinations for outbound acquisitions.

After the SGX-ASX deal (yet to be fully approved in Australia) the largest acquisitions were of CapitaLand China-Orient Overseas Developments ($2.2 billion) and Investor Group Banco BTG Pactual ($1.8 billion).

Analysts are predicting most action will come from real estate next year as the many Singaporean REITs looked for local acquisitions to build up their portfolios. Financial services will also figure but aren’t generating much excitement, while the energy sector looks set to benefit from developing economies in the region, after a 45% fall in M&A activity in 2010.

source & article: Channel NewsAsia

Asian stock market consolidation and Bursa Malaysia

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Following this week’s Singapore-Australia stock exchange takeover announcement, some eyes are turning to Bursa Malaysia for potential alliances. Most analysts agree the the exchange is not in a position to consider formal mergers at present, but a round of consolidations in other regional markets would be enough to prompt further speculation about Bursa’s future.

Some of the gloss has come off the Singapore-Australia deal since it was speculated last Friday, with SGX losing around S$1 billion of its market capitalization and key Australian political figures expressing concern or even outright objection to the plan. A failure to do a deal might see Singapore looking elsewhere for mergers, but Bursa Malaysia is probably not a target, given imbalances in the size and nature of the two markets. Better options for future Bursa Malaysia deals may exist in China, Thailand or Indonesia.

Time is right to consolidate Malaysia’s auto industry

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A round of Malaysian auto industry mergers could be on the horizon with Proton’s Managing Director, the Prime Minister and the president of the Malaysia Automotive Association (MAA) all suggesting it’s time for a consolidation. Number one producer Proton has just celebrated its 25th anniversary, has produced over 3.3 million vehicles and employs over 30,000 people. Although it has surpassed its own targets and sold 156,653 vehicles this year, its manufacturing facilities are reported to be underutilized and actually capable of producing a million cars per year. Under these circumstances, it might seem to have more to gain from a merger than some of the smaller companies. Statements from the government, however, appear to support such a move: Prime Minister Najib Razak commented that only innovative companies who were willing to make changes could succeed in the 21st century.

source & article: Bernama (via Business Times)

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