Tuesday, September 30, 2008

Maybank-BII deal concluded?

If there is one thing that one can learn from the negotiation for the passage of the U.S. Bailout Deal, this is it-- a deal is only a done deal when everyone has signed on the dotted line. So, the same would apply to the Maybank-BII deal, which appears to be nearing its conclusion.

As noted in my previous post, the deal may be doable if Fullerton can further reduce the selling price to address Maybank's concern for overpaying for BII and subsequently having to make huge goodwill writeoff. To wit:
If Fullerton & Maybank can agree that a fair deal is one where BII is valued at 3.0 times its book value, then Fullerton may further lower its selling price by USD121 million (on top of the earlier USD165 million reduction). Would that happen? We will have to wait & see.

After the close of the market today, we have an announcement that Fullerton has offered to lower its selling price by 14.7% (i.e. an additional 3.7% on top of the 11% reduction proposed earlier) and Maybank has accepted this offer; thus signaling the conclusion of its BII acquisition. This is less than the figure that I have put up earlier (where I envisaged total discount of 19.1%, pegging the selling price at 3.0 times BII's book value) but it is enough to seal the deal.

Based on the reduced purchase price for the 55.5%-stake in BII of USD1.279 billion (or, RM4.400 billion), the total acquisition cost of BII will amount to USD2.304 billion (or, RM7.927 billion).

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