- We believe that financial institutions involved in the mega merger are likely to make announcements soon for the extension of the negotiation period further from 8 October 2014.

- To recap, 8 October 2014 is the final day of the 90-day Exclusivity Period for discussions to be held.

- The 90-day exclusivity period is based on the 10 July 2014 date, which is the date that CIMB Group Holdings (CIMB), Malaysia Building Society Bhd (MBSB) and RHB Capital Bhd (RHB Cap) entered into an exclusivity agreement to negotiate and finalise pricing, structure, and other relevant terms and conditions for the proposed merger for a period of ninety (90) days (Exclusivity Period).

- The 10 July 2014 date is also the date that Bank Negara Malaysia (BNM) has, vide its letter dated 10 July 2014, stated that it has no objection for the parties to commence negotiation for a possible merger of the businesses and undertakings of CIMB Group and RHB Capital, and the merger of Islamic banking businesses with MBSB.

- The approval from Bank Negara is valid for a period of 6 month from the date of BNM’s letter.

- RHB Cap had said in the announcement then there will be an automatic extension of the Exclusivity Period upon a submission being made to BNM by the parties on the proposed merger, until the date of execution of the relevant definitive agreement(s) to effect the proposed merger.

- The next deadline is likely to be at the end of the 6-month approval period granted by BNM, which is 10 January 2015.

- We maintain on contrarian BUY stance on CIMB. We maintain HOLD on RHB Cap and MBSB.

Source: AmeSecurities