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[KUALA LUMPUR] Shares of Malaysia's CIMB Group Holdings Bhd dropped nearly 2.2 per cent on Thursday after local media reported the Employees Provident Fund (EPF), a key shareholder in CIMB, may be forced to cut its stake to help facilitate a planned merger.
Analysts say the stock market views the merger of CIMB, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) as a negative for CIMB, which they fear would be valued too cheaply. Any sign that the merger may go through would weigh on the stock, the analysts say.
The EPF is not allowed by the local bourse to vote in the proposed merger because it is a major shareholder in all of the banks, according to filings on Tuesday. The Malaysian state pension fund, which bankers have said is in favour of the merger, owns about 14.5 per cent of CIMB, 41 per cent of RHB and 65 per cent of MBSB.
Local media reported that EPF may reduce its stake in CIMB, thereby removing the issue of the fund's conflict of interest in the merger.
Shares in RHB remained unchanged while MBSB dropped 3 per cent. The benchmark stock index rose 0.4 per cent.
The move by the stock exchange has given other investors in the banks more clout and thrown doubt on the deal's prospects.
Abu Dhabi-based Aabar Investments and OSK Holdings Bhd, the second and third-largest shareholders in RHB, will now have a bigger say in shaping the creation of Malaysia's biggest bank which financial sources have said could have a market value of US$22 billion.
Both investors would see their combined voting power in the lender increase to 53 per cent from 31 per cent now that the EPF is barred from voting.