Bank of Tokyo Helps Reduce Bumiputra-Commerce Debts

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Feb 22 2007
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When Malaysian second largest banking group Bumiputra-Commerce Holdings Berhad (KLSE: COMMERZ, stock-code 1023) announced the suspension of its’ stock on the Kuala Lumpur Stock Exchange early today, Feb-22-2007, it raised everyone’s eyebrow. There were suspicious which is very unlikely to happen pending the announcement – that Bumiputra-Commerce was announcing another acquisition. And it would be interesting to see the market reaction if it indeed materialized as Bumiputra-Commerce has just put itself in a new $1.1 billion debt to finance the acquisition of Southern Bank.

Now the news is out that Japan’s Bank of Tokyo-Mitsubishi UFJ (BTMU) (TYO: 8306) agreed to invest $382 million (RM 1.335 billion) in Malaysian banking group Bumiputra-Commerce Holdings Bhd via the subscription of 117 million new BCHB shares priced at RM11.41 per share, a 17% premium above BCHB’s closing price on Feb 21 of RM9.75. This will raised BTMU stake in BCHB from 1.1% to 4.5%.

Bumiputra-Commerce, part owned by the Malaysian government and the brother of Malaysian deputy prime minister, aims to become a regional Southeast Asian bank. It already controls Indonesia’s Bank Niaga PT (JAK: BNGA) and also the broking arm of Singapore investment firm GK Goh. It created the much sensation business news when in 2006 it launched a hostile take-over of a smaller but profitable Chinese-based Southern Bank for $1.81 billion.

Do you understand now why every Tom, Dick & Harry wants to squeeze into Malaysian’s politics so badly? It’s the ticket to money-printing machine if you’re someone up the ladder of the power-chain. What you need are some lucks, the right connection and park at the right parking lot. It’ll be jackpot if you’re borne into the family of existing powerful politicians. In this case, you just need to take over (who cares if you do forcefully?) a well-managed and profitable bank to create a supermarket financial institution. Your close-political connection will silence all the critics. You don’t have to worry about financial capability because all the other banks will queue-up to offer all the money you need to finance the acquisition. Push up the price of your stocks to make it expensive and offer certain stakes to foreign partners of which the money can be used to offset the initial acquisition.

Do you still think making money is that damn difficult? Think again. Along the journey if you get bored playing with banking business and wish to diversify to other toys, just sell it. Banking license is a commodity which can fetch a high premium in Malaysia. Comes another round of 1997 Economic Crisis, you’ll still escape unscratched as the government wills definitely bails you out. Check out the price the Malaysian government was willing to pay Tajuddin Ramli to acquire back Malaysian Airline System (KLSE: MAS, stock-code 3786) shares. The worst that can happen to your investment is “Breakeven”. You’re guaranteed no prosecution or jail sentence even when the lady luck is not with you that you’re finally broke. Who cares about minority shareholder’s interest? Get real, this is Malaysia, a land where politic dictate the direction of how the businesses are to be run.

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