Malaysian investment bank K&N Kenanga Holdings Bhd will buy rival ECM Libra Financial Group Bhd’s financial units for RM875.1 million (US$274.5 million), making it the country’s largest independent investment bank by sales and third-largest share brokerage by trading value.

Kenanga will finance the deal by issuing 120 million of its shares at one ringgit each and 95.5 million loan stocks along with RM659.6 million in cash, its group managing director, Chay Wai Leong, told reporters at a news conference.

The deal, expected to be completed by year-end, values ECM Libra’s investment banking arm at 1.27 times book value, which at end January stood at RM688 million (US$215.8 million).

Lee Kok Khee, senior director at Kenanga Investment, told reporters today that the purchase would boost revenue by 10 to 15 percent annually due to a wider customer base and distribution network.

The move comes as Malaysian authorities encourage bank mergers to create larger groups with the financial muscle to grab market share as the Association of South-East Asian Nations plans to form a single economic zone by 2015.

It also follows the recent tie-up between RHB Capital Bhd and OSK Holdings Bhd’s investment bank, which saw the merged entity become the biggest brokerage service provider by market share in Malaysia.

Kenanga and ECM Libra said on June 7 they had obtained Malaysian government approval for the deal.

“With the merger, Kenanga will have one in every five remisiers in the country, giving it Malaysia’s largest remisier network” said Chay, Kenanga’s group managing director.    

ECM Libra intends to distribute the 16.4 percent stake it will hold in Kenanga after the deal among its existing shareholders.

- Reuters