KUALA LUMPUR: K&N Kenanga Holdings Bhd has cleared the first hurdle to acquiring ECM Libra Financial Group Bhd’s investment banking unit after receiving the go-ahead from Bank Negara Malaysia (BNM) some three weeks ago, according to sources.
After months of speculation, sources told The Edge Financial Daily that Kenanga will only be acquiring ECM Libra’s investment banking unit rather than the entire listed entity.
The sources said the consideration will be in cash. This will make ECM Libra a cash-rich entity, and enable it to pursue new business interests.
In the current global economic conditions, ECM Libra may be able to acquire new businesses at depressed prices, but what businesses the company might be looking at is not known.
An analyst noted that ECM Libra is increasingly acting like an asset management company, having made substantial investments in companies such as AirAsia Bhd and Eastern & Oriental Bhd.
It is learnt that BNM had approved the application towards the end of October and both parties are currently awaiting a decision by the Securities Commission (SC) pending several minor details. If all goes according to plan, negotiations will commence as soon as the regulatory approvals are secured.
If negotiations are successful, shareholder approval will be needed from both groups to finalise the acquisition. The whole process could be completed as early as 1Q next year.
Sources also revealed that BNM had received the merger and acquisition (M&A) application from the two groups sometime in late September to October.
This was roughly two to three months after The Edge had reported in July that merger talks were stalled due to issues relating to pricing and non-performing loans.
Earlier in April, The Edge had reported that the two companies were exploring a potential merger.
It was widely known at the time that Tan Sri Azman Hashim was looking to exit his position in ECM Libra as under the Banking and Financial Institutions Act, an individual is not allowed to hold substantial stakes in more than one financial institution.
Azman had a deemed interest of 23.85% (as at April 6) in ECM Libra, as stated in its 2011 annual report, and a 16.78% indirect stake (as at July 30) in AMMB Holdings Bhd, as noted in its 2011 annual report.
ECM Libra’s disposal of its investment banking business should remove the onus on Azman to sell down his stake in ECM Libra.
The co-founders of ECM Libra, Lim Kian Onn and Datuk Seri Kalimullah Masheerul Hassan have a 9.62% and 3.95% stake in the company respectively.
ECM Libra’s net profit for its 2Q ended July 31 saw a stellar improvement of 189.12% to RM14.62 million from RM5.06 million in the quarter last year.
Cahaya Mata Sarawak Bhd (CMS) is Kenanga’s largest shareholder with a 25.07% stake followed by Deutsche Asia Pacific Holdings Pte Ltd and Tengku Noor Zakiah Tengku Ismail with a 16.55% and 7.5% stake respectively.
Kenanga saw a major improvement for 2Q ended June 30, returning to the black with a net profit of RM5.58 million compared to a loss of RM21.49 million in the corresponding period last year.
Earnings for the potential acquirer have been volatile, having suffered a loss for the year ended Dec 31, 2010 of RM50.63 million due to a huge impairment of loans amounting to RM88 million.
ECM Libra’s shares shed 1.5 sen to close at 78 sen on the back of 596,100 shares traded while Kenanga rose two sen to 70 sen on thin volume of 25,600 shares.
This article appeared in The Edge Financial Daily, December 1, 2011.
After months of speculation, sources told The Edge Financial Daily that Kenanga will only be acquiring ECM Libra’s investment banking unit rather than the entire listed entity.
The sources said the consideration will be in cash. This will make ECM Libra a cash-rich entity, and enable it to pursue new business interests.
In the current global economic conditions, ECM Libra may be able to acquire new businesses at depressed prices, but what businesses the company might be looking at is not known.
An analyst noted that ECM Libra is increasingly acting like an asset management company, having made substantial investments in companies such as AirAsia Bhd and Eastern & Oriental Bhd.
It is learnt that BNM had approved the application towards the end of October and both parties are currently awaiting a decision by the Securities Commission (SC) pending several minor details. If all goes according to plan, negotiations will commence as soon as the regulatory approvals are secured.
If negotiations are successful, shareholder approval will be needed from both groups to finalise the acquisition. The whole process could be completed as early as 1Q next year.
Sources also revealed that BNM had received the merger and acquisition (M&A) application from the two groups sometime in late September to October.
This was roughly two to three months after The Edge had reported in July that merger talks were stalled due to issues relating to pricing and non-performing loans.
Earlier in April, The Edge had reported that the two companies were exploring a potential merger.
It was widely known at the time that Tan Sri Azman Hashim was looking to exit his position in ECM Libra as under the Banking and Financial Institutions Act, an individual is not allowed to hold substantial stakes in more than one financial institution.
Azman had a deemed interest of 23.85% (as at April 6) in ECM Libra, as stated in its 2011 annual report, and a 16.78% indirect stake (as at July 30) in AMMB Holdings Bhd, as noted in its 2011 annual report.
ECM Libra’s disposal of its investment banking business should remove the onus on Azman to sell down his stake in ECM Libra.
The co-founders of ECM Libra, Lim Kian Onn and Datuk Seri Kalimullah Masheerul Hassan have a 9.62% and 3.95% stake in the company respectively.
ECM Libra’s net profit for its 2Q ended July 31 saw a stellar improvement of 189.12% to RM14.62 million from RM5.06 million in the quarter last year.
Cahaya Mata Sarawak Bhd (CMS) is Kenanga’s largest shareholder with a 25.07% stake followed by Deutsche Asia Pacific Holdings Pte Ltd and Tengku Noor Zakiah Tengku Ismail with a 16.55% and 7.5% stake respectively.
Kenanga saw a major improvement for 2Q ended June 30, returning to the black with a net profit of RM5.58 million compared to a loss of RM21.49 million in the corresponding period last year.
Earnings for the potential acquirer have been volatile, having suffered a loss for the year ended Dec 31, 2010 of RM50.63 million due to a huge impairment of loans amounting to RM88 million.
ECM Libra’s shares shed 1.5 sen to close at 78 sen on the back of 596,100 shares traded while Kenanga rose two sen to 70 sen on thin volume of 25,600 shares.
This article appeared in The Edge Financial Daily, December 1, 2011.
