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Malaysian M&A is anything but easy

A hostile bid in the Malaysian banking market is almost unheard of. But CIMB's pursuit of Southern Bank has provoked more than just headlines, and now almost every major banking group in the country is in play.

OF MALAYSIA’S TOP 10 banking groups, only one, the biggest, is out of the M&A frame. Four banks are involved in negotiations, and there is speculation of varying credibility about the remaining five. A smaller bank, Bank Islam, is being bid for by Dubai Financial, a subsidiary of Dubai Investment Group.

At the centre of the action is Southern Bank, Malaysia’s ninth-largest banking group, which for more than three months has been pursued by CIMB, part of the Bumiputra-Commerce Group, Malaysia’s second largest. The deal’s twists and turns have been front-page news, with interest stoked by the involvement of prominent figures that include the sultan of Malaysia’s Selangor state; Nazir Razak, CIMB’s CEO; and Chua Ma Yu, one of the country’s most prominent investors.

The deal highlights the highly concentrated ownership structure of several of Malaysia’s largest banks and the instability that can arise when there is dependence on a shareholder with a substantial stake who can change his mind.

In February, the Southern Bank-CIMB saga took another dramatic turn when Southern Bank called off merger talks with CIMB, which had yet to make a formal offer, “to seek near-term merger alternatives”, raising the possibility that what could turn out to be Malaysia’s largest-ever M&A transaction could also turn into a hostile takeover, an extremely rare outcome in Malaysia.

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