Maybank shares dip as BII deal approval reinstated

KUALA LUMPUR (Reuters) -Top Malaysian lender Maybank fell sharply on Wednesday after it said a day earlier that the central bank has reinstated its approval for the $2.7 billion bid for Bank Internasional Indonesia (BII).

Maybank shares were down 3.38 percent at 7.15 ringgit by 0120 GMT, underperforming the broader market, which was trading 0.47 percent lower.

Maybank is the biggest listed company in Malaysia in terms of market value.

"The market has always considered this deal as overpriced, and that is why Maybank's shares rose when the central bank revoked its approval earlier," said a dealer at a local brokerage house. "The latest development means that the deal should now go through, which in our view is negative for Maybank," he said.

State-controlled Maybank unveiled a deal to buy a 56 percent stake in BII in March. But it hit a snag in July when Indonesia introduced a new takeover rule which requires an acquirer in a general offer to reduce its stake in the takeover target by 20 percent in two years.

Malaysia's central bank subsequently blocked the deal on concerns the new Indonesian takeover rules could lead to material losses for Maybank.

Maybank said on Tuesday that Bapepam would allow an extension of the timeframe to cut its stake in BII if a re-float exercise led to material losses to Maybank. It said the conditional approval would be triggered if potential losses arising from the exercise exceed 10 percent of the total investment cost paid by Maybank in taking over BII.

"We believe (the pricing) is overvalued for a mediocre loan and deposit franchise," Citigroup said in a report and downgraded Maybank's rating to "sell" from "buy". "Add to this the short-term tight liquidity situation in Indonesia and margins could potentially contract," it said.

Shares in BII have been suspended since late July. Maybank has a market capitalization of about $10 billion.

CONDITIONAL APPROVAL

Maybank rattled investors when it unveiled the deal in March to buy a 56 percent stake in BII from Singapore state investor Temasek TEM.UL and South Korea's Kookmin Bank.

Maybank had previously been criticized by investors for expanding too slowly outside its home market.
But in an apparent relief for investors, the deal hit a snag in July when the central bank blocked the deal on concerns the new Indonesian takeover rules could lead to material losses for Maybank.

After saying repeatedly that no exemption would be given, Bapepam finally agreed to extend the timeframe for Maybank to cut its stake in BII if a re-float exercise led to material losses.

The conditional approval would be triggered if potential losses arising from the exercise exceed 10 percent of the total investment cost paid by Maybank in taking over BII.

"The deal is obviously overpriced and I think the latest arrangement has been done as a face-saving measure for the deal to go through," said a Kulala Lumpur-based fund manager, who asked not to be named.

Source Reuters