How much could Primus Pacific expand EON Capital?

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Feb 04 2008
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Despite its highest offer to buy RHB (Rashid Hussain Bhd) at an offer price of RM1.97 a share and RM5.00 a share for RHB Capital Berhad (KLSE: RHBCAP, stock-code 1066), EON Capital Berhad lost the bid to a lower but government-linked entity EPF (Employess Provident Fund) which only offered RM1.80 and RM4.80 a share respectively for RHB and RHBCAP. Those happened about a year ago in Mar, 2007 and since then EON Capital was subjected to numerous rumors and speculation that its days were as good as game over.

The main factor why EON Capital Berhad (KLSE: EONCAP, stock-code 5266) would see its D-Day since the failure to acquire RHB was because one of its shareholders – DRB-HICOM Berhad (KLSE: DRBHCOM, stock-code: 1619). The controlling shareholder of DRB-Hicom, Tan Sri Syed Mokhtar Albukhary was desperately wanted 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.

Primus Pacific buy EON CapitalHong Kong-based Primus Pacific Partners Ltd. whose major shareholders include the Qatar Investment Authority, the Kuwait Investment Authority and Taiwan’s fifth-largest financial holding firm, Fubon Financial confirmed that it plans to buy 20 percent of EON Capital Berhad for 1.34 billion ringgit ($415 million) from DRB-Hicom today. This means Primus Pacific will pay DRB-Hicom RM9.55 per share or a premium of 55 per cent to its current price – a high price since it comes with the single largest shareholder status.

EON Capital has total assets of RM39 billion and the price RM9.55 a share represents 2.16 times its book value. However Primus does not plan to make a general offer though. Malaysia’s central bank has approved the transaction and the acquisition is expected to be completed in March at the earliest. After acquired the EON Capital, Primus plans to inject capital to expand its staff and management team.

It would be interesting to see if EON Capital could play a bigger role besides the current image as a lender in national automaker Proton. To do so Primus needs free hand to do what it believes would beneficial to its newly acquired baby. But would the rest of the shareholders especially the government-linked entities prove to be hindrance block?

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