Jan 21 2007
General Electric Capital, a unit of U.S. conglomerate General Electric Company (NYSE: GE, stock), is keen on DRB-Hicom’s (KLSE: DRBHCOM) 20.2 percent stake in small Malaysian bank EON Capital Berhad (KLSE: EONCAP, stock-code 5266), the Star newspaper said on Saturday, Jan-20-2007.
General Electric Capital could offer up to 9 ringgit per EON Capital share, a 28 percent premium to Friday’s closing price of 7.05 ringgit, because the 139 million-odd shares are a controlling block, the paper said. If this is true, it will values the stake at 1.25 billion ringgit ($357.2 million) and the entire firm at 6.23 billion ringgit.
Seventh-largest lender EON Capital’s main business is in automotive financing, primarily for local automaker Proton Holdings Berhad (KLSE: PROTON, stock-code 5304) and other brands like Honda, Mitsubishi and Chevrolet that are sold by DRB-Hicom.
The controlling shareholder of DRB Hicom, Tan Sri Syed Mokhtar Albukhary was reported to be the person wanting to dispose the 20.2 percent equity. Besides Syed Mokhtar, General Electric has the option to talk to other substantial shareholders of EON Capital such as Tan Sri Tiong Hiew King (holding 17.1% stake) and Rin Kei Mei (holding 15.5% stake). I believe General Electric will talk to all the parties to pull-off the best deal possible.
EON Capital posted RM211.3 million on RM1.7 billion sales for the nine months ended September 2006. Of all the major shareholders, I think Syed Mokhtar is the person most desperate wanting to sell as he still has another financial service provider in Bank Muamalat Berhad which provide Islamic financial services via his 70% Bukhary Capital Berhad. Furthermore he needs to sell-off EON Capital soonest possible to liquidate for cash in order to reduce DRB Hicom debts which totaled RM1.9 billion. Syed Mokhtar paid RM3.60 a share or about RM560 million to wrest control of DRB Hicom four years ago. Since then, the stock price has almost halved his initial investment (talk about greed and political connection). Furthermore, should Proton Holdings Bhd be sold of to either Volkswagen Aktiengessellschaft (FRA : VOW), PSA Peugeot-Citroen (EPA : UG) or General Motors Corp. (NYSE : GM, stock) before Syed Mokhtar able to find a buyer, EON Capital might not command the dominance as the proton’s primary automotive financier.
GE Money, a unit under General Electric which focuses in consumer financial services has as much as US$163 billion in assets. GE Capital International Holdings Corp, a unit of the U.S. giant recently completed the acquisition of a 29% stake in Thailand’s Bank of Ayudhya Public Company Limited (BAK: BAY) for US$600 million.
# TIP: With such rumor, EONCAP will definitely attracts speculators which will drive up the stock price further. After RHB sold to KFH, the possibilities of other smaller banks being acquired is high. So buy on rumor, sell on news.
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January 21st, 2007 by financetwitter
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