Southern Bank looked set to end a deadlock over a RM6.5 billion takeover bid by Bumiputra-Commerce Holdings on Monday after both banks suspended trading in their shares.

Trading in Bumiputra-Commerce, the country's second largest lender, and Southern shares was suspended on Monday, pending an announcement, the Malaysian stock exchange said.

Southern, the country's second-smallest bank by assets told Bursa Malaysia that it will make an announcement tomorrow regarding a "significant change in business direction."

Separately, Bumiputra-Commerce also said it would also announce on Tuesday information regarding its proposal to acquire Southern Bank.

Sources said the Southern Bank board accepted Bumiputra-Commerce's revised offer price of RM4.30 per share, plus 5.0 sen dividend per share, at a board meeting held on Saturday.

The Star daily reported today that Southern Bank chief executive Tan Teong Hean had relented and accepted Bumiputra-Commerce's offer after a protracted deadlock.

"We think it (takeover negotiation) has gone on too long," Tan was quoted as saying. "We seek closure and resolution as we want to get out of the storm."

Hostile takeover

There has been intense speculation that Southern had reached a deal with Bumiputra-Commerce over its revised offer worth RM6.5 billion, ending a prickly tussle that has lasted several months.

Southern rejected an initial offer by Bumiputra-Commerce, saying it was too low and had reportedly sought a merger with Maybank, the country's biggest, in a bid to fend off a hostile takeover by Bumiputra-Commerce.

Southern's highly-anticipated merger is in the spotlight as it could spark off a new wave of banking consolidation after a lull of three years as Malaysia prepares to open up its financial sector to foreign lenders in 2007.

Bumiputra-Commerce is eager to close the gap with rival Maybank before the government allows foreign banks greater access to the local market next year.

A sweeping programme three years ago merged Malaysia's 54 banks and finance houses into 10 banking groups.

Bank Negara wants a second wave of consolidation to leave between six and eight banks ahead of full market liberalisation in 2007 that will open the industry to further competition from global banks such HSBC and Citigroup.