DUBAI — Kuwait Finance House (KFH) is likely to up its bid to gain control of Malaysia's Utama Banking Group Bhd's (UBG) stake in RHB Capital Bhd, with the emergence of a new rival, investment banking sources said yesterday.
A Malaysian newspaper reported yesterday that KFH is likely to pay as much as $1.26 billion (RM4.4 billion) to UBG. Meanwhile, a rival contender for RHB stake ermerged on Thursday as Hong Kong-based Primus Pacific Partners Ltd (PPP) was cleared by Bank Negara (Malaysia's central bank) to bid for RHB.
The new bidder too has a strong GCC connection through Qatar Investment Authority, the government controlled investment arm of Qatar which is one of the founding members of PPP.
The central bank approval for PPP's bid has triggered a clause in the memorandum of understanding (MoU) UBG has with KFH, whereby UBG has seven days to decide on its suitors. UBG is expected to make its choice next Wednesday.
Under the KFH offer, as much as $630 million will be paid to UBG for its 31.14 per cent stake in RHB, while an additional $630 million will be used to recapitalise the RHB group.
KFH is the largest Islamic bank in Kuwait. Debt-ridden RHB is the parent of RHB Capital Bhd, Malaysia's fourth largest lender.
According to banking industry sources, KFH, acting in concert with a group of investors from the Middle East, plans to turn the RHB group into a giant Islamic financial service entity. According to the plan, under the new management, RHB Capital, which owns the unlisted RHB Bank will shed off its non-converted Islamic assets, and the proceeds will be used to expand the RHB group's Islamic credentials.
Additionally, KFH is prepared to inject as much as $2.28 billion.
The expanded cash base will be used specifically to acquire Islamic banks and convert conventional banks to Islamic banks in other countries.
According to Malaysia's Business Times, KFH also plans to expand RHB Capital branch networks in Singapore, Thailand and Indonesia.
The other contender PPP has structured a plan that will wipe out 50 per cent of RHB's debts immediately, with the balance debt being redeemed within a three-year span.
Under the PPP plan, they will inject $143 million in cash to reduce the $1 billion debt to $860 million and will then issue $343 million worth bonds to repay part of the remaining debt. PPP is expected to submit a final bid next week.
Although KFH had agreed last month to buy UBG's stake in RHB, the deal was not exclusive. Earlier in June, the Employees Provident Fund — the second biggest shareholder in RHB — made an offer that was rejected by UBG as being too low. The EPF's offer price was never publicly disclosed, leaving the market in the dark about the expected price. RHB's shares closed at RM3.62 ($1.03) yesterday.
Under the new circumstances, a competitive bidding is likely while whichever party that ends up with the deal must clear the entire debt at RHB and have a deal that is acceptable to EPF (Employees Provident Fund) and the central bankb