EON Cap remains shrouded in uncertainty

By YVONNE TAN
KUALA LUMPUR: If the situation at EON Capital Bhd (EON Cap) seemed hazy before its EGM on Monday, the fog thickened when the shareholders’ meeting was adjourned to March 15 due to some technical issues.
The adjournment will no doubt buy the shareholders extra time for interested parties aside from Hong Leong Bank Bhd (HLB) to make their offers for the financial group’s assets and liabilities.
“The latest newsflow will likely give rise to hope that EON Cap will be able to find another buyer among the domestic banking groups, which might provide a higher offer,” AmResearch told clients in a note following the adjournment of the EGM yesterday.
“There are other interested parties,” a source said.
Three names – RHB Bank Bhd, Alliance Financial Group Bhd (AFG) and Affin Bank Bhd – have been bandied around as potential suitors.
However, informed sources indicated that talks with any parties were only verbal with no firm offer on the table yet.
AmResearch said that from its checks with AFG last week, the company had said it was not interested in bidding for EON Cap. As for Affin, “we believe that indications are that a bid would be premature at this stage,” it said.
Earlier, property group Mulpha International Bhd failed to obtain Bank Negara approval to commence talks for a stake in EON Cap. It is also reported that a second application from construction outfit Teratai Sanjung (M) Bhd was also unsuccessful, presumably because the two non-financial firms do not fit in with the central bank’s plan to consolidate the banking industry in the country.
Mulpha is believed to have written to Bank Negara seeking an explanation for the rejection of its proposal to negotiate the purchase of a stake in EON Cap.
To recap, shortly after the EON Cap board rejected a RM4.92bil takeover offer from HLB for its assets and liabilites and decided not to table the offer to shareholders, director Rin Kei Mei, who owns 15.5% in EON Cap, called for an EGM to reconstitute the board, presumably to put through to shareholders any fresh takeover offer from HLB.
HLB’s cash offer was deemed by the board as “undervalued”, given that the financial group had undergone a three-year transformation programme which had positioned it for “strong and sustained future growth as an independent company”, EON Cap had said.
Rin is said to be a willing seller of his stake, given a low entry cost while EON Cap’s single largest shareholder, Primus Pacific Partners (HK) Ltd, is largely perceived as the reluctant seller as it had purchased the shares at RM9.55 each in February 2008 and would have lost some US$100mil had the HLB deal gone through.
Primus has a 20.2% stake in EON Cap. Tan Sri Tiong Hiew King has 17.1%, Khazanah Nasional Bhd, 10% and the Employees Provident Fund 12%.
Apart from Primus, all were said to be interested in HLB’s offer.
The adjournment of the EGM will especially provide some breathing space for Primus, which needs Bank Negara approval to commence talks with any potential party, observers say.
Primus believed that it should be able to sell its stake at a price higher than HLB’s offer of RM7.10 per share as growth in EON Cap was starting to take off, they said.
The country’s seventh largest lender, EON Cap’s net profit for its financial year ended Dec 31 (FY09) jumped 155% to RM341.1mil from FY08, driven by an 8% growth in loans.
However, it reported a lower net profit of RM61.59mil for the fourth quarter ended Dec 31, down 6.3% compared with RM65.7mil in the previous corresponding period on higher operating and taxation expenses.
The financial group has said it is targeting a 15% growth in loans this year, backed by its aggressive three-year business strategy.
One of the technical issues that led to the adjournment of Monday’s meeting, which lasted just under 20 minutes, was that chairman Tan Sri Syed Anwar Jamalullail was chosen as proxy for shareholders who collectively own some 6% interest in the banking group.
Section 149 of the Companies Act states that to qualify as a proxy, one needs to be a member (shareholder) of the company, an approved advocate solicitor or approved company auditor.
As Syed Anwar was not any of these, he could not carry out the proxy votes.
However, in a late filing with with Bursa Malaysia yesterday, EON Cap said Syed Anwar had purchased 1,000 shares in the company at RM6.94 each on Monday.
Earlier,there was also some concern over the words “with immediate effect” used in the EGM notice with regard to the proposed appointment of new directors.
“The appointments, if approved at the EGM scheduled for Feb 22 at Hotel Equatorial KL, will be of immediate effect,” the notice had said.
Rightfully, under local laws, appointments of financial institution directors would first have to be approved by Bank Negara.
A new notice for the next meeting to be held on March 15 will be appended to read the proposed directors will be appointed upon “approval of the regulator”, instead of “with immediate effect”.
The notice for the fresh EGM is expected today.