EON Cap says HLB offer too low

By YVONNE TAN
Advisers indicate other parties interested in EON Cap
yvonne@thestar.com.my
PETALING JAYA: The EON Capital Bhd (EON Cap) board of directors yesterday said the RM4.92bil cash offer from Hong Leong Bank Bhd (HLB) significantly undervalues EON Cap and its financial advisers have indicated that there are other parties interested in acquiring EON Cap.
In a statement last night, the board said it had sought clarification from HLB on a range of details in its acquisition proposal, with particular focus on valuation.
“The board is evaluating this approach but on the face of it, the offer price significantly undervalues EON Cap,” chairman Tan Sri Syed Anwar Jamalullail said in the statement.
The statement said the banking group launched a three-year transformation programme in October 2007 which sharply improved the performance of the bank despite difficult economic conditions in 2009, delivering 8% growth in residential mortgage loans, 15% growth in credit card and personal loans and 14% growth in hire purchase loans in the first three quarters of 2009.
Earnings improved in terms of net income, return on assets and return on equity, it said.
“In evaluating the HLB offer, we will consider all alternatives open to us to fulfil our responsibility to shareholders,” Syed Anwar said.
Meanwhile, EON Bank group chief executive officer Michael Lor said EON Cap’s financial advisers had indicated that apart from HLB, there were other parties interested in acquiring it.
“I am not sure if they (these parties) are seeking Bank Negara’s approval at the moment to start talks with us but our financial advisers have introduced some potential parties to us.
“If there are better opportunities, the board is bound to make sure it pursues all of them,” Lor said after the underwriting ceremony for ECS ICT Bhd.
EON Bank is a subsidiary of EON Cap. Goldman Sachs and Ethos & Co are respectively EON Cap’s international and local financial advisers for its strategic review.
There is speculation RHB Capital and Alliance Financial Group Bhd may be interested parties but sources close to the companies indicate that this is unlikely at this point.
“RHB has expressed that it is not interested in EON Cap. It is more interested in building value from its current structure,” a source said yesterday.
A source at Alliance said he had no knowledge of Alliance submitting a competing bid for EON Cap at this point.
Meanwhile, saying that he “was in no position” to reveal who the parties were nor elaborate further, Lor said the board would “within the next few days” make an announcement as to what it planned to do and what decision would be taken.
In its RM4.92bil cash offer for the assets and liabilities of EON Cap last Thursday, HLB had given the EON Cap board seven days to confirm the tabling of the offer for consideration and approval by the shareholders.
Lor said the board was looking at the “best options and the best alternatives. That’s why they are taking a little bit more time in their deliberations.”
On Jan 6, Bank Negara gave the green light for HLB to start negotiations on the acquisition of EON Cap’s assets and liabilities, including equity interests.
EON Cap had also said it was seeking Bank Negara approval to start negotiations with multiple parties, with regards to this.
Research outfit AmResearch Sdn Bhd does not expect a competing bidder for EON Cap to emerge in the short term.
‘’We believe EON Cap’s shareholders will be better off taking the current all-cash offer from HLB and considering alternative investments elsewhere,’’ the house told its clients last week.
Still, other houses like TA Securities and RHB Research believe that EON Cap’s major shareholders (in particular Primus Pacific Partners (HK) Ltd) may offer some resistance due to pricing issues. Primus, which holds a fifth of EON Cap, is said to be uninterested in the all-cash offer which would crystallise its losses.
Primus had in early 2008 bought the shares at RM9.55 a share, which is more than a third above HLB’s offer price which works out to RM7.10 a share.
Analysts feel the other four non-strategic shareholders of EON Cap – Tan Sri Tiong Hiew King, Rin Kei Mei, Khazanah Nasional Bhd and the Employees Provident Fund – would eventually agree to HLB’s offer.
On the entirely cash deal, an analyst said it was easier than a share-swap deal as “a cash deal would be completely clean; not to mention more cost-effective.”
“Some of the shareholders may want to make a clean exit and a cash deal is seen as the best option,” she said.
Meanwhile, Lor said that from a management perspective, what was more important for the bank was that it continued to drive its business “as aggressively” as possible.
“Within the first two weeks or so of the year, we’ve already been involved in two initial public offerings, I think that’s a good thing,” he said, referring to Homeritz Corp Bhd and ECS.
EON Cap’s subsidiary MIMB Investment Bank is the advisor, sole underwriter and co-placement agent for the ECS IPO.