Malaysia's investment giant CIMB is set to take over the private Southern Bank after the central bank foiled efforts by Southern to fend off the move, reports said today.

Bank Negara nixed a proposal by Southern Bank Berhad (SBB) to acquire Singapore insurer Asia General Holdings yesterday, effectively ending what analysts considered an SBB poison pill defence plan to hold off the takeover.

The acquisition would have seen Southern Bank burdened with debt and made it more expensive for the government's Bumiputra Commerce Holdings Berhad (BCHB) - of which CIMB is a unit - to snap up the independent niche bank, reports said.

"This means BCHB can finally get really going on the negotiations now. But it will still take time, given that it's a big merger," a unnamed source close to merger talks was quoted as saying by the New Straits Times .

SBB's chief executive officer Tan Teong Hean has reportedly been trying to stave off a takeover by CIMB although both sides have met to discuss the situation.

The tussle over SBB's fate provided the backdrop to the resignation Monday of the bank's chairman Syed Mohamad Yusof Syed Nasir, who was reportedly against SBB's Asia General purchase.

Syed Mohamad, along with Selangor's Sultan Sharafuddin Idris Shah, have both offered as major SBB shareholders to negotiate with CIMB over their stakes.

Alternative action

CIMB in October announced it had obtained approval from the central bank to begin discussions for the possible merger.

Bank Negara did not say why it had given the thumbs down to SBB's proposed acquisition but market sources said the central bank had objected to aspects of the purchase, including a deposit of RM50 million (US$13.26 million) for the deal.

SBB, which announced the central bank's decision yesterday, indicated it would appeal the move and still proceed with a December 12 extraordinary general meeting at which shareholders were to vote on the Asia General purchase.

"As appropriate, the board of directors will review alternative courses of action, including whether there is any basis for reconsideration," it said.