Merger- CIMB and MBB withdrew

After weeks of hype and drama, both CIMB and Maybank called off merger negotiations with RHB. After various discussions with RHB's management and stakeholders on both sides and following a high-priced crossing of RHB shares between Abu Dhabi GLCs, both giants seems to take the view that they wouldn't be able to negotiate a "value creating deal".

The seemingly very careful move by both banks, withdrawing early mean saving time and cost as merger negotiations are resource-consuming and distracting, especially for staff of both parties.

RHB's market value had gone up a lot over the past year; it jumped up after the merger talks were announced on 31st May 2011 and then got benchmarked even higher with the Abu Dhabi crossing. The approval to commence negotiations is valid for a period of 3 months from the date of BNM’s letter.




On 23 June 2011, both CIMB and Maybank arrived at a decision to cease negotiations with RHB with immediate effect. In a press release on the same day, Dato’ Sri Nazir Razak, CEO of CIMB Group said, “Based on our various discussions and our assessment of the present expectations of key stakeholders, we do not believe that we will be able to arrive at a value creating merger”.

Merger negotiations are both resource consuming and distracting for staff and stakeholders. Therefore, by not prolonging the unnecessarily, the banks are allowing all parties to return to ‘business as usual’.

Of course either bank could have offered their shares in exchange at a high premium too but expectations of key decision makers on both sides were quite far apart on valuation principles; some saw it as a pure merger, others felt it should be priced like a take-over.

However we are not surprised by CIMB's decision to withdraw as there being limited synergies as compared to former merger between BCB-SBB or their overseas acquisitions, namely Bank Thai and Lippo Bank fo Indonesia.

For CIMB, the end of the merger talks came as a huge relief to shareholders and staff who feel that they should prioritise expanding their regional footprint instead of spending near to RM20 billion on enlarging the Malaysian operations.

Maybank, the biggest bank in Malaysia made same wise decision particularly with regards to ROI. With the clearly margins are compressing across the region for all banks, they are instead instituting cost management measures across the firm by cutting down cost, more diligent in recruitment process by hiring based on need, not just because there is a vacancy.

CIMB Group is Malaysia’s second largest financial services provider and one of Southeast Asia’s leading universal banking groups. It offers consumer banking, investment banking, Islamic banking, asset management and insurance products and services. Headquartered in Kuala Lumpur, its key operations are located in Malaysia, Indonesia, Singapore and Thailand. The Group also has presence in Brunei, Cambodia, Myanmar and Vietnam. Beyond ASEAN, the Group has offices in India, Hong Kong, Bahrain, London and New York, as well as a 19.99%stake in Bank of Yingkou, China.

CIMB Group operates its business through three main brand entities, CIMB Bank, CIMBInvestment Bank and CIMB Islamic. CIMB Group is also the majority shareholder of CIMB Niagaa in Indonesia, and the single largest shareholder of CIMB Thai in Thailand.CIMB Group is listed on Bursa Malaysia via CIMB Group Holdings Berhad. It has a marketcapitalisation of approximately RM60.9 billion as at 31 March 2011. The Group has over 38,000employees located in 13 countries.