Malaysia's Hong Leong targets Bolton
Christina Toh-Pantin
KUALA LUMPUR, January 2: Malaysia's Hong Leong Bank Bhd fired the opening shot in financial service mergers on Friday when it said it planned to merge its finance arm with Bolton Bhd's finance company, analysts said.The deal, terms of which have not yet been set, would be the first proposed financial service merger since central Bank Negara Malaysia said this week it would encourage mergers among the country's nearly 40 finance firms. Central bank officials said the plan would involve a list of core finance firms and a list of companies that need to be merged into the "umbrella" entities. "The bigger plan is to have more mergers, so this I believe will be the first of many such mergers among the finance companies," said Hudson Teh, head of research at Sarawak Securities. But he said it was difficult to assess the impact of the proposed merger between Hong Leong Finance Bhd and Bolton Finance Bhd because the details had not yet been announced. James Lim, senior group managing director of Hong Leong
Bank, told reporters the companies began talking after the directive from Bank Negara, although he noted that the firms had long had a friendly relationship. Terms would be decided after Hong Leong Bank consulted its financial advisor, Lim said. Hong Leong Finance is a wholly-owned subsidiary of Hong Leong Bank. Hong Leong Bank, with assets of over 20 billion ringgit($5.10 billion), would dwarf its target, which has around 1 billion ringgit in assets. Bolton Finance would become a subsidiary of Hong Leong Finance. The companies said the merger was not expected to result in layoffs as Hong Leong was expected to absorb Bolton Finance's 400 staff. For Bolton, the merger would result in "better economies of scale and lower cost of funding", Bolton chief executive officer Lim Ching Choy said in a statement. Asked how many other finance companies Hong Leong had looked at before settling into talks with Bolton, Hong Leong's Lim said: "We're still looking...There's a list. Everybody has that list." He was
referring to the list of some 30-odd finance companies that are expected to be among institutions Bank Negara will name as those that should be merged. Hong Leong Finance, along with Arab-Malaysian Finance Bhd, Mayban Finance Bhd and Public Finance Bhd, are among the handful of finance companies in the merger core, Bank Negara has said. The four Tier-1 finance companies together control some 60 per cent of the market. Hong Leong Finance has 600 million ringgit in share capital, with shareholders' funds at the end of last year of 500 million ringgit. Asked how Hong Leong felt about being the first to announce a finance company merger and whether his firm was trying to get a leg-up on the consolidation, Lim said, "It's not a race." Central bank's finance-firm merger plan KUALA LUMPUR, January 2: Malaysia's central bank on Friday announced guidelines to encourage mergers among the country's nearly 40 finance companies, saying it had identified up to six core institutions. Bank Negara
said in a statement it was setting a "target dateline" for the finance company mergers "to be finalised and activated" by the first quarter of 1998. It did not name the anchor or core finance firms, but said they would include the four Tier-1, highly capitalised finance companies and one or two others. The central bank, which has been prodding the financial services sector towards consolidation to save costs and gird up for competition, said some of Malaysia's commercial banks "are also moving towards merger". It said it expected commercial bank mergers also to be finalised by the end of the first quarter. Following the finance company mergers, Bank Negara said it expected the "anchor" group of companies to account for at least 90 per cent of the finance company business. Currently five or six of the biggest firms control over 70 per cent of the business, it said. Discussions between some of the finance companies were already at an advanced stage, the statement said, noting that one merger -- between the
finance arms of Hong Leong Bank Bhd and Bolton Bhd -- had been announced on Friday. Bank Negara said that all deposits plus accruing interest in finance firms "would be safe, irrespective of the finance companies involved in the mergers".
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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