According to TheEdge Financial Daily, Bursa Malaysia’s Appeals Committee (AC) has rejected EPF’s appeal to vote in the mega merger, being a common shareholder (related party) in the three entities involved in the merger. This was despite the EPF being allowed to have an oral representation at the meeting held on 10 Dec 2014. (Source: The Edge)

Comment:  The  outcome  of  the  committee’s  decision  did  not  come  as  a surprise to us. In our view, chances of the proposed merger exercise going through  continues  to  face  stumbling  block  from  Aabar  Investments,  who currently  holds  21.9%  and  without  EPF  in  the  picture,  will  see  its  voting rights increase to 37.4%. Should the other minority shareholders appear to be in favour of the deal, it is still possible for RHBCap to achieve a 50% + 1 share vote of approval from the minority shareholders without Aabar’s vote.

Our view remains unchanged in respect of the merger, we are cautious on the proposed merger exercise as it is creating a too-big-to-fail entity, with weak  ROE  generation  while  synergies  remain  uncertain  due  to  the  high merger cost involved.

Source: Affin Hwang Capital Research - 11 Dec 2014