Jan 6 2011, 11:31 PM
QUOTE
SINGAPORE : Malaysia's biggest bank, Maybank, is acquiring Singapore brokerage Kim Eng in a deal worth S$1.8 billion.
Analysts said the price is on the higher side, but Kim Eng's strong regional presence is worth the extra investment.
Kim Eng will now also stand to benefit from being a bank-backed brokerage, with access to cheaper funding and more clients.
When CIMB bought GK Goh Stockbrokers in 2005, the deal gave the Malaysian bank a key footprint in regional markets like Indonesia and Thailand.
Now Maybank is following in its rival's footsteps.
And the move is said to benefit both sides.
Albert Fong, president of Singapore Remisiers said: "Currently it is very well established at home as a commercial bank (but) the stock-broking outfit is not so well established like Kim Eng. Kim Eng with Maybank, it will become a bank-backed securities outfit. That combines well for both. With the strong branding and the reputations of both entities, it will enhance the business opportunity for future expansion."
Under the deal, Maybank is going to acquire a 44.6 per cent stake in Kim Eng at S$3.10 a share - a 15 per cent premium to its closing price on Wednesday - from Ronald Ooi and Yuanta Securities Asia Financial Services.
It will then make a mandatory offer to minority shareholders for all remaining shares and privatise the company.
This will value Kim Eng at S$1.8 billion.
The acquisition price represents a multiple of 1.9 times Kim Eng's book value, which is slightly higher than the average of 1.4 times for such deals.
Analysts said, while expensive, the deal will still give Maybank a regional footprint in one fell swoop. It will be cheaper than Maybank growing its brokerage operations market-by-market across the region.
As the second Malaysian bank to make a foray into Singapore's brokerage sector, analysts said Maybank is tapping Singapore's position as a financial capital of ASEAN.
"ASEAN is sort of like the forgotten story of Asia. I think people are sitting up and realising that you have a huge consumer base here - you've got economies that are increasingly integrating and you've got economic value to be extracted from that. So that fits that theme very well," said Trevor Kalcic, head of Southeast Asian Equity Research at RBS.
Since the financial crisis, brokerages have had a higher cost of borrowing.
Analysts said recourse to Maybank's retail deposits will lower that cost and also give Kim Eng access to the bank's corporate clients to develop its investment banking business.
Analysts said the price is on the higher side, but Kim Eng's strong regional presence is worth the extra investment.
Kim Eng will now also stand to benefit from being a bank-backed brokerage, with access to cheaper funding and more clients.
When CIMB bought GK Goh Stockbrokers in 2005, the deal gave the Malaysian bank a key footprint in regional markets like Indonesia and Thailand.
Now Maybank is following in its rival's footsteps.
And the move is said to benefit both sides.
Albert Fong, president of Singapore Remisiers said: "Currently it is very well established at home as a commercial bank (but) the stock-broking outfit is not so well established like Kim Eng. Kim Eng with Maybank, it will become a bank-backed securities outfit. That combines well for both. With the strong branding and the reputations of both entities, it will enhance the business opportunity for future expansion."
Under the deal, Maybank is going to acquire a 44.6 per cent stake in Kim Eng at S$3.10 a share - a 15 per cent premium to its closing price on Wednesday - from Ronald Ooi and Yuanta Securities Asia Financial Services.
It will then make a mandatory offer to minority shareholders for all remaining shares and privatise the company.
This will value Kim Eng at S$1.8 billion.
The acquisition price represents a multiple of 1.9 times Kim Eng's book value, which is slightly higher than the average of 1.4 times for such deals.
Analysts said, while expensive, the deal will still give Maybank a regional footprint in one fell swoop. It will be cheaper than Maybank growing its brokerage operations market-by-market across the region.
As the second Malaysian bank to make a foray into Singapore's brokerage sector, analysts said Maybank is tapping Singapore's position as a financial capital of ASEAN.
"ASEAN is sort of like the forgotten story of Asia. I think people are sitting up and realising that you have a huge consumer base here - you've got economies that are increasingly integrating and you've got economic value to be extracted from that. So that fits that theme very well," said Trevor Kalcic, head of Southeast Asian Equity Research at RBS.
Since the financial crisis, brokerages have had a higher cost of borrowing.
Analysts said recourse to Maybank's retail deposits will lower that cost and also give Kim Eng access to the bank's corporate clients to develop its investment banking business.
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