Should we rejoice or mourn on Maybank-BII deal?

Let’s rejoice and celebrate because Malaysia’s largest lender, Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155), has just managed to beg PT Bank Internasional Indonesia’s (JAK: BNII) major shareholder Fullerton Financial Holdings, a unit of Singapore's Temasek, for more sweets. Maybank agreed to a rebate of S$315.2 million (RM758.9 million) after rejected the initial rebate of S$236.4 million (RM569.2 million) – an improvement of a whopping 33.33 percent, mind you. At last, the state-owned bank knows how to negotiate, big deal. I bet Maybank’s board of directors was popping the Champaign as if it was the greatest victory on earth.

With the current weak market sentiment it’s only logical for Singapore’s Temasek to back down and compromise on a lower offer. Seriously it was a pathetic offer and what is an extra of S$78.8 million to Temasek compared to the still-overprice deal pushed into Maybank’s throat? The joke here is that while the latest rebate is welcome, it only reduces the offer price to 433 Indonesian Rupiah from the initial 511 Indonesian Rupiah per BII share for the first 55.6 percent stake. Maybank will still have to pay 511 Indonesian Rupiah per BII share for the remaining 44.4 percent stake. Therefore Maybank will pay a total of RM4.26 billion ($1.24 billion) for 55.6 percent and RM3.8 billion ($1.11 billion) for the remaining 44.4 percent stake.

This is perhaps another classic example of how incompetent the decision-makers (or politicians) at the negotiation table. It is still unbelievable how generous Maybank was in its offer of 4.6 times book value for BII. Rumors were flying that former Finance Minister, Daim Zainuddin, had his hand on the deal and is set to make handsome profit from Maybank’s coffer. As the new deputy Chairman of Khazanah the newly Finance Minister cum deputy PM, Najib could probably shed some lights on this acquisition since Maybank is part of Khazanah’s Transformation Program for Government-linked Companies (GLCs). One of the intentions of the program it to continue Maybank’s Economic Profit, lest the special “friendship” with Temasek has blinded the objective and reverse it to Economic Loss *grin*.

Obviously it was not a smart move to acquire BII in the first place simply because it was done at the wrong time and most likely by the wrong people (board of directors under instruction from politicians?). Maybe the money is better spent acquiring some trouble but potential financial institutions from U.S. You don’t need to be a brain-surgeon to scout for such companies and guess what. For once Malaysia could claim victory because it would definitely be able to buy U.S. assets at a lower price than Singapore. That’s right! Singapore’s Temasek Holdings bought into U.S. financial companies such as Merrill Lynch & Co. Inc. (NYSE: MER, stock) end of last year and is planning to raise its stake to 13.7 percent from 9.4 percent. Just follow the money and buy at a lower price and you can laugh at Singapore, no sweat.

Admit the mistake that the BII’s acquisition is indeed pricey and stop making a fool of yourself with announcement that you’re happy with the agreement (better rebate offer) when in reality it was a bad deal. The only party that can afford a celebration is Temasek Holdings which is making roughly fivefold profit from the sale. And they are still giggling all their way to the bank, thinking of Maybank’s stupidity. With BII’s last traded stock price at 310 Indonesian Rupiah a share, it will take more than a rebate coupon to convince investors that the deal was a freaking good one.

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