Malaysia's second largest financial group, Bumiputra-Commerce Holdings, today announced a landmark takeover of Southern Bank in the country's largest-ever corporate deal.

The deal, worth RM6.7 billion (US$1.8 billion) sees Bumiputra-Commerce, through its unit CIMB, offering a price of RM4.30 per Southern Bank (SBB) share plus a five sen dividend each.

"Today, we are at the centre of the largest, most public takeover in Malaysian history with ripples that will be felt in coporate Malaysia," SBB chief executive director Tan Teong Hean (left) said at a joint press conference with CIMB group chief executive Nazir Razak (right).

The announcement put an end to some five months of market speculation over negotiations behind closed doors, with the deal variously swinging from a merger to a hostile takeover - a rare event in Malaysian corporate circles.

Southern Bank in early February ditched merger talks after wrangling over the share price and later rejected a CIMB effective offer price of RM4.15 per share, saying it undervalued the bank.

"I'm happy that we got closure," said Tan, who had reportedly been reluctant to hand over the bank, and who described the events as "very challenging".

The merger has also attracted interest over hopes it will spark off a new wave of banking consolidation after a lull as Malaysia prepares to open up its financial sector to foreign lenders in 2007.

Unanimous support

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

"Developments here will trigger a second wave of consolidation in the financial sector as the industry prepares for a new age of fierce global competition," said Tan.

Nazir hailed the merger as a landmark deal which he said had the unanimous support from the boards of Bumiputra-Commerce (BCHB) and SBB, and substantial Southern Bank shareholders.

"The entire transaction is a landmark merger exercise and value enhancing for all shareholders, customers and employees of BCHB and SBB," he said.

Nazir said the smaller SBB niche bank would help investment bank CIMB to develop its consumer operations and cement the group's position as the second largest banking group behind Maybank.

Combined credit card operations will have an enlarged market share of 11 percent, small and medium business loans will increase by 28 percent and retails loans by 50.7 percent overall, said Nazir.

Number Two

BCHB's total assets from the deal will also increase from RM121 billion to RM152 billion, he said.

"With this acquisition we will be decisively number two across the board," he said in reference to key rival Maybank.

Nazir also said his group had no current plans for more acquisitions but would focus efforts on expanding to neighbouring countries, including Indonesia.

"I think our first priority is export to Indonesia. The group has control of (Indonesian) Bank Niaga, but to date we have not exported consumer banking to Indonesia as such," he said.

"Our priority markets will be Malaysia, Singapore and Indonesia."

SBB shareholders have a choice of taking the payout in cash or in a combination of cash and unsecured loan stocks. The voluntary general offer is expected to be completed in late May or early June with approval needed from the central Bank Negara and shareholders, said Nazir.