Deutsche Bank AG : K&N Kenanga to Buy ECM Libra's Investment Banking Unit
06/15/2012| 03:35am US/Eastern
-- K&N Kenanga to buy ECM Libra Financial Group's investment banking business and merge it with its own investment bank
-- The $275.4 million cash-and-share deal is expected to be completed by December
-- The merged entity will be Malaysia's biggest investment bank that isn't backed by a bank, says Kenanga executive
(Recasts 1st paragraph, adds Kenanga executive's comment in 4th paragraph, context throughout.)
By Jason Ng and Abhrajit Gangopadhyay
KUALA LUMPUR--Malaysia's K&N Kenanga Holdings Bhd. (6483.KU) said Friday it will buy ECM Libra Financial Group Bhd.'s (2143.KU) investment banking unit and merge it with its own investment bank, underscoring the rush to consolidate in the country's financial services sector as intense competition and cheap credit squeeze profit margins.
The 875.1 million ringgit (US$275.4 million) deal will create the country's largest independent investment bank and the second-largest stock brokerage by trading volume, Kenanga Group Managing Director Chay Wai Leong said at a news conference.
Word of the deal comes as Malaysia's central bank has been encouraging tie-ups in the domestic financial industry to help local banks scale up and better compete regionally. Malaysian banks have faced pressure due to rising competition, especially after the government eased banking regulations in 2009 to woo more foreign banks to set up shop in the country.
It also comes as the country's market for initial public offerings has proved exceptionally resilient this year, with several businesses moving ahead with offerings while other markets have struggled, and local banks are well positioned to get in on the action.
Kenanga, partly owned by Deutsche Bank AG (DB), said the purchase price comprises MYR659.6 million in cash and the remainder in stock to be issued to ECM Libra, and the planned merger will "create a stronger and more competitive investment banking platform."
Mr. Chay said the merged entity will enjoy lower costs, easier access to high-margin retail business and higher profitability.
ECM Libra said in a statement the deal will allow it to exit an increasingly challenging business environment.
The deal, which Mr. Chay expects to be completed by December, follows RHB Capital Bhd.'s purchase of OSK Holdings Bhd.'s investment banking arm for MYR1.95 billion last month.
That in turn came after top Malaysian lender Malayan Banking Bhd. acquired Kim Eng Group last year for $1.4 billion, in support of its plan to expand in to Laos, Vietnam, Cambodia, Indonesia, and Thailand.
Earlier this year, CIMB Group Holdings bought 60% of Philippines-based Bank of Commerce for MYR881 million and Royal Bank of Scotland Group PLC's cash equities and associated investment banking businesses in the region.
Meanwhile, IPO activity in Malaysia has been heating up.
Felda Global Ventures Holdings Bhd. raised $3.13 billion this week in Asia's biggest and the world's second largest IPO this year after Facebook Inc.'s $16 billion deal, making the country the world's third most active venue for IPOs so far this year, having raised US$3.45 billion in total already, according to data provider Dealogic.
A slew of other Malaysian IPOs, including a $2 billion offering from IHH Healthcare Bhd. and possible $1.5 billion offerings from power producer Malakoff Corp. and cable TV operator Astro All Asia Networks, are also set to come to market.
-Write to Jason Ng at email@example.com