No, you cannot vote, Bursa tells EPF

PETALING JAYA: Bursa Malaysia Securities Bhd had on Tuesday rejected the Employees Provident Fund Board (EPF) from voting in the proposed merger of RHB Capital Bhd (RHBCap), CIMB Group Holdings Bhd and Malaysia Building Society Bhd (MBSB).
The EPF, which owns about 14.5% of CIMB, 41% of RHB and 65% of MBSB, failed in its argument that the interests of its 14 million members were at stake.
"By virtue of EPF being a common major shareholder in all three affected companies (RHB Cap, MBSB and CIMB Group) as well as being the single largest shareholder of both RHBCap and MBSB, there exists such a potential conflict of interest situation, where EPF may be able to influence the proposed merger to its own benefit," Bursa had said in its letter.
"There are no adequate justifications that the potential conflict of interests involving EPF has been eliminated or
sufficiently mitigated," it added.
Shares in all three banks were suspended on Tuesday pending the announcement. Trade will resume today.
Bursa also noted that the EPF had had prior knowledge of the deal talks before they were disclosed.
The EPF said in September that it had not been part of any of the discussions about the proposed merger.
Reuters said Bursa's decision to bar a key shareholder in CIMB Group and two other lenders from voting on their planned merger has given minority investors more clout and thrown doubt on the deal's prospects.
Seeking to create Malaysia's biggest bank with a market value of more than $20 billion, the three have proposed a complex deal structure widely seen as aimed at blocking potential objections from Abu Dhabi-based Aabar Investments - the second-largest shareholder in one of the lenders, RHB Capital Bhd.
The deal's success would have been all but assured if state pension fund Employees Provident Fund (EPF), which bankers have said is in favour of the merger, had been granted a waiver to rules that prevent it from voting because it has substantial stakes in all three banks.
"The refusal to grant the waiver was seen as plus for corporate governance in Malaysia, but CIMB may now scramble to appease Aabar and other minority shareholders," it said yesterday.
"Aabar will feel emboldened, particularly given the outright attempt to circumvent its interests," Kevin Kwek, a senior analyst at Sanford C. Bernstein, wrote in a research note, adding that the deal's valuations would likely be rejigged.
Kwek said the chances of the deal being dropped had also climbed but that he did not see it as the most likely scenario as CIMB had few options to grow bigger and Malayan Banking Bhd (Maybank) was likely waiting in the wings to woo RHB.

There has been much market speculation that Aabar, which owns around 21% of RHB, will seek terms more favourable to itself. Aabar has repeatedly declined to comment on the merger.
With the EPF barred from voting, Aabar's voting rights increase to around 36%. If it joined forces with RHB's third-largest shareholder OSK Holdings Bhd, the two would have a combined voting power of 53%.
OSK Holdings, a small financial group built by veteran broker Ong Leong Huat, is involved in property investment and equity financing. OSK officials did not respond to requests for comment.
If the deal does go through, it would give birth to a banking group with assets totalling around US$190 billion, surpassing Maybank and making it Southeast Asia's fourth-biggest bank.
Under the complicated structure submitted to the central bank for approval, RHB will issue shares to acquire the much larger CIMB but CIMB shareholders will own 70% of the merged entity.
According to Malaysian listing rules, RHB only needs to gain the approval of 50% of its shareholders if it is the acquiror. If CIMB bought RHB, then it would need to gain approval from 75% of the seller's shareholders.