Kuwait Finance House Buying RHB?

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Nov 26 2006
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Kuwait Finance House ( KFH ) has expressed interest in buying a stake in Malaysian financial house Rashid Hussain Bhd (RHB : stock-code 1309) which controls Malaysia’s fourth-largest banking group, RHB Capital (RHBCAP : stock-code 1066).

According to unnamed sources, Kuwait Finance House met Sarawak Chief Minister Abdul Taib Mahmud last week, whose family controls Cahya Mata Sarawak Bhd which controls Rashid’s parent, Utama Banking Group (UBG : stock-code 6831).

According to Edge, RHB’s other major shareholders include state pension manager, the Employees Provident Fund (EPF), which has a stake of 31.7 %, and another pension fund, Kumpulan Wang Amanah Pencen (with a 10.8 % interest).

Utama has earlier rejected an unspecified offer from the EPF for its 32.9 percent stake in RHB as it could not agree on the price. However EPF was expected to raise its bid for RHB.

RHB was founded by two very successful figures – Rashid Hussain and Chua Ma Yu. It was well-known that Chua Ma Yu was the main driver who positioned RHB as the leader in securities firms before things got out of hand and Chua opted out from the company. It was said that Chua was the person who pioneered the concept of ESOS (employee share option scheme) which created lots of wealthy employees within RHB prior to 1997 Asia Economic Crisis.

RHB Bank was formed with the controversial merger of Kwong Yik Bank (one of the oldest and most successful Chinese-based bank) and DCB Bank in 1997. Sime Bank joined the RHB Bank family at the later stage.

Chua Ma Yu, the wealthy Malaysian private financier who co-founded Rashid Hussain Securities with Rashid Hussain in 1983 and who was president of the group until 1992, once describes RHB as a bank unhealthily dominated by a single man. “RHB has been a personality-driven bank for too long, driven by Rashid Hussain,” says Chua.

As fast as Rashid Hussain climbed the ladder of success to become the most admire bankers, he fells with the same speed when the over-exposed RHB met the 1997 crisis. Politics and business in Malaysia, as in most of the developing world, is not easily divorced. Rashid Hussain was widely perceived to be well-connected to the jailed & recently released former finance minister and deputy prime minister Anwar Ibrahim.

Suddenly RHB was a loser and surprisingly being acquired by a smaller and not well-known Sarawak-based bank, Utama. The well-connected Utama Group was chosen as an anchor bank due to Utama’s links to more favored government officials.

Rashid Hussain is married to a daughter of Malaysian Chinese magnate Robert Kuok, whose business interests extend from Beijing to Sydney.

RHB Capital Bhd is currently suing Tan Sri Abdul Rashid Mohamed Hussain and five other individuals for a total sum of RM1.43 billion for alleged breach of fiduciary duties and alleged negligence.

The five were Chong Kin Leong in his capacity as former director of RHB Capital and RHB Equities; Seah Fook Chin in his capacity as former director of RHB Capital and RHB Equities; Tajul Ariffin Mohd Tahir in his capacity as former executive director of RHB Securities and in his capacity as former director of RHB Equities; Ong Tiang Lock in his capacity as former director of RHB Equities; Rosley Ahmad in his capacity as former principal legal adviser and former company secretary of RHB Capital, RHB Securities and RHB Equities.

With this latest rumor, there’ll definitely bounds to be speculators/investors/punters that will start taking position investing in RHB related stocks pending the official announcement. After all, ANZ has succeeded in acquiring substantial shares within AMMB Holdings Berhad (AMMB : stock-code 1015).

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