Business

Wednesday July 30, 2008 MYT 7:51:25 PM

Short-term positive for Maybank after BII setback


KUALA LUMPUR: Maybank’s setback in its acquisition of PT Bank Internasional Indonesia TBK (BII) would be short-term positive for the former due to pricey valuation and high borrowings needed to finance the deal.

Analysts said Wednesday they were surprised by the latest development as it they had expected the transaction to progress smoothly after the central bank of Indonesia gave its approval.

“A collapse of the plan to acquire BII would be taken positively by the market as the deal has created negative sentiment on the stock, with the grouses being primarily the pricey valuation of 3.7 time to 4.0 times FY08-09 price/book value (P/BV) and the high borrowings needed to finance the deal,” said a research house.

It said Maybank might revert to a higher dividend payout ratio of 60% to 70% if it did not have to reserve internal funds for the acquisition of BII. Maybank was expected to fork out RM8.8bil to gain 100% control of BII.

On Tuesday, Maybank said it had received a letter from Bank Negara that due to recent changes in take-over rule enacted by the Indonesian Government on June 30, its take over of the bank might result in losses for Maybank.

The proposal may result in Maybank potentially incurring material losses from selling down of the shares and write-down of investment upon the implementation of the New Take-Over Rule.

Under the New Take-Over Rule, a new controlling shareholder is obliged to divest to public shareholders a minimum of 20% and at least 300 parties within two years after the tender offer is undertaken.

However, in the long term, analysts said if the BII deal failed, Maybank would have to fall back to its small existing operations in Indonesia where it had only two to three branches.

“Given the stance that Bank Negara has taken on potential losses on the BII investment, Maybank is likely to refrain from acquiring stakes in other major Indonesian banks, most of which are listed,” it said.

 
MAYBANK :  [Stock Watch]  [News]


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