Desperate DRB-Hicom to sell EON Capital to Primus?

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Sep 26 2007
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Having lost the battle in acquiring Rashid Hussain Berhad’s jewel RHB Bank despite putting the highest offer on the table to Utama Banking Group (KLSE: UBG, stock-code 6831), EON Capital Berhad (KLSE: EONCAP, stock-code 5266) was directionless since then. Many predicted EON Capital could be the target of other banks thereafter. Prior to that there were many rumors of M&A which might see EON Capital being wiped out from the map of Malaysian banking industry.

Early of the year, General Electric Capital, a unit of U.S. conglomerate General Electric Company (NYSE: GE, stock), was reportedly keen on DRB-Hicom’s (KLSE: DRBHCOM, stock-code 1619) 20.2 percent stake in EON Capital with mind-boggling offer of RM9.00 per share which will values the stake at RM1.25 billion. The rumor however never materialized.

Later there was rumor that US private equity firm Newbridge Capital was interested in the same EON Capital stake. The repetitive statements from CIMB (Commerce International Merchant Bankers), an investment bank of Bumiputra-Commerce Holdings Berhad (KLSE: COMMERZ, stock-code 1023) pushing the idea of having smaller number of banks had created speculation that the brother of current Malaysia Deputy Prime Minister, Nazir Razak, himself was probably interested in EON Capital.
DRB-Hicom sell EON CapitalEverything remains speculation until today when the corporate business might see EON Capital finally find its partner, or maybe not. DRB-Hicom said it won Central Bank approval to start talks with Hong Kong-based Primus Pacific Partners Ltd. on the sale of DRB’s stake in EON Capital Bhd. The controlling shareholder of DRB Hicom, Tan Sri Syed Mokhtar Albukhary was reported to desperately want to dispose the 20.2 percent equity in EON Capital for quite some time as he needs cash to reduce DRB Hicom debts which totaled RM1.9 billion.

Interestingly, DRB-Hicom had denied reports back in July 2007 that Primus Pacific Partners Ltd. was interested in its stake in EON Capital. Whether DRB can sell its stake or not this time will depends very much on the offer price from Primus (or other interested parties not visible yet) and the government’s approval for the sale. Primus Pacific’s major shareholders which include the Qatar Investment Authority, the Kuwait Investment Authority and Taiwan’s fifth-largest financial holding firm, Fubon Financial might need to cough up nothing less than RM9.00 per EON Capital share. Such speculation will definitely create excitement in EON Capital’s stock price when the market opens tomorrow, Thursday.

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