Maybank-BII deal goes wrong? Taste your own medicine

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Sep 29 2008
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Only after heavy criticisms and sell-off of Malayan Banking Berhad’s (KLSE: MAYBANK, stock-code 1155) shares as a sign of protest, the Malaysia’s Central Bank woke up (from sleep) and told Maybank to behave and re-negotiate for a better pricing in its acquisition for PT Bank Internasional Indonesia (BII) (JAK: BNII). The Minority Shareholder Watchdog Group (MSWG) did bark against the silly deal but as expected the authorities did not give it much thought since the group is toothless. The proposed deal was the laughing stock within Abdullah Badawi’s administration simply because the 4.6 times book value was more than twice the book value of state-owned Maybank itself and the highest amongst Indonesian banks. Indonesian leading lender, Bank Mandiri’s own book value is only 1.98 times. Instantly speculation was floating that the deal was filled with hanky-panky hands.

Foreign investors and local fund managers dumped the stock, a normal reaction to such a silly business transaction. It’s puzzling that while buyer normally fights tooth and nail to get a better pricing Maybank’s board of directors seemed to see it fit and happy with such a generous offer price regardless of how attractive Indonesian banking business is. You don’t just raise your hand unnecessarily to bid for the highest price without a limit. Only fools will blindly do such thing and considering Maybank is the largest lender of the country, such ignorance is disturbing as the shareholders and depositors’ money were being spent lavishly. But of course you won’t hear any single brave soul from the Maybank’s board of directors resign to take full responsibility.

Maybank BII deal goes wrongLong story short, on Saturday Maybank reportedly did not accept the last-minute rebate of S$236.4mil (RM570mil) by Singapore’s Temasek unit Fullerton Financial Holdings Pte Ltd to close the controversial sale of BII. Sure, Maybank dare not accept such an offer as it would be an insult to accept such a cheap sweet in exchange for the US$2.7 billion deal. But would Maybank’s losses limited to only RM480 million deposit should the deal goes bad? Knowing how smart Singapore’s government is in doing business, could there are clauses (surely Maybank’s board of directors knew about it) within the “Sale and Purchase” agreement that would enable Temasek to sue Maybank for losses *time for easy money, Temasek*?

In fact Temasek would be happier if Maybank decided to abort the plan at this stage because it could sue for more money while maintaining its stake in BII, theoretically. Earlier Maybank MD, Abdul Wahid Omar, said that the loss from the RM480 million deposit would narrow to RM290 million due to unrealized foreign exchange gains (parked in Singapore) of RM193 million. Nevertheless if Maybank was idiot enough to sign a blank check in the sense that the Malaysia largest lender is willing to pay the difference of the agreed 4.6 book value and the maximum book value that another buyer is willing to pay for the stakes should Maybank walks away then Maybank could be in deep trouble, though I doubt Maybank is so stupid. The potential losses could be huge if Temasek has the option and decided to seek legal case.

Heads need to roll and it’s high time to clear all the doubts. Transparency and accountability are all we are asking. It’s not that the minority shareholders and the public are asking for those responsible for the deal to be put behind bars, not that you can dream of such action in Malaysia. All we’re asking is for those responsible to admit the mistake and resign with honour. Is this too much to ask? Who are the people that the authorities are protecting here? As much as you hate Indonesian’s flip-flop policies, Maybank is actually tasting it’s own medicine when Malaysian government is practicing the same pathetic flip-flop policies which are driving many investors away, no?

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Maybank is a GLC? If this is so than I see the hand of Khazanah behind it. In this case I wonder how many more of the overseas deals that Khazanah are initiating are overpriced?


hello shariman … definately there’re hidden hands behind this deal … do doubt about it …

cheers …

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