PETALING JAYA: RHB Capital Bhd (RHBCap) has announced a major corporate exercise, as speculated, as the country’s fourth largest banking group seeks to strengthen its capital structure, improve tax efficiency and support future growth, three months after aborting a mega-merger deal with local rival CIMB Group Holdings Bhd and sister company Malaysia Building Society Bhd.
To kick off the group’s restructuring exercise, RHBCap has proposed a fund-raising exercise via a renounceable rights issue of RM2.5bil to meet Basel III and future growth requirements.
The company told Bursa Malaysia yesterday that proceeds from the exercise would be injected into RHB Bank Bhd, which would assume the group’s listing status.
“The restructuring would drive better capital and tax efficiency and profit growth.
“This is expected to bring us closer to our regional peers and is a catalyst for the potential rerating of the RHB banking group,” group managing director Kellee Kam said in a statement.
Under the reorganisation exercise, RHB Bank will acquire from RHBCap its stakes in RHB Investment Bank and subsidiaries, RHB Insurance Bhd and the assets and liabilities of the other operating subsidiaries of the group.
“For the avoidance of doubt, the subsidiaries of RHBCap which are either dormant or in the process of being liquidated or voluntarily wound up will not be transferred to RHB Bank,” it said.
Kam said in the statement that this marked a significant step forward for the group, as it addressed the challenges of the new regulatory environment.
He said the move would propel the transformation of the RHB banking group into a ‘bank holding company’ structure, in line with major regional banking groups across Asean.
“The restructuring will drive better capital and tax efficiency and profit growth,’’ he said.
“This is expected to bring us closer to our regional peers. We will continue to remain focused and serve our customers to the best of our abilities,” he added.
In the event the internal reorganisation is not implemented, the proceeds from the rights issue will be utilised to repay the bank’s borrowings.
As at end-2014, company and group total bank borrowings stood at RM3.11bil and RM12.39bil, respectively.
RHBCap said the actual gross proceeds from the proposed rights issue exercise would be determined on the final issue price and the number of rights shares to be issued.
Shares in RHBCap were last traded at RM8.20 yesterday.
For illustration purposes, the rights issue will be priced at a discount of between 20% and 30% to the theoretical ex-rights price (TERP) based on a five-day weighted average market price of the stock.
RHBCap assumes that the rights shares will be priced at RM5.70, or a 25% discount to the TERP price of RM7.61. This will entail the issuance of 431.3 million new rights shares.
Meanwhile, it also announced that the proposed distribution and capital repayment would only be determined upon the completion of the rights issue exercise.
“It will be implemented via a reduction of the share premium account of the company and the par value of the existing RHBCap shares, and the remaining balance via the company’s retained earnings, after the settlement of all outstanding borrowings,” it said.
After the proposed distribution and capital repayment is completed, it said that the existing shareholders of the company would continue to hold shares in RHBCap with a nominal par value, in the proportion of their shareholdings as at the distribution entitlement date.
Thereafter, RHBCap will appoint a liquidator to liquidate the company, and any surplus cash after the settlement of all liabilities and defrayment of expenses will be returned to shareholders.
As at the last practisable date, the Employees Provident Fund, which holds 41.49% of the voting shares of the company, will eventually hold more than 33% of the voting shares in RHB Bank after the completion of the proposed distribution and capital repayment, it illustrated.
“RHBCap will cease to be a shareholder of RHB Bank upon the completion of the proposed distribution and capital repayment. The effective percentage shareholdings of RHBCap’s shareholders in RHB Bank shall remain unchanged before and after the proposed distribution and capital repayment,” it said.
The above exercises are subject to approval from the Securities Commission, Bursa Securities, Bank Negara, the Home Affairs Ministry, the sanction of the High Court of Malaya and RHBCap shareholders, among others.
