Mega Islamic bank may rise from proposed CIMB Group, RHB Capital, and MBSB merger

Bank Negara Malaysia approves start of discussions.

CIMB Group, RHB Capital and Malaysia Building Society (MBSB) have announced the approval from Bank Negara Malaysia to commence discussions with the aim of merging the businesses of both RHB and CIMB as well as creating an enlarged Islamic Banking franchise with MBSB.

According to a joint release from CIMB Group, RHB Capital, and MBSB, following the approval of Bank Negara Malaysia, the three parties have entered into a 90-day exclusivity agreement to negotiate and finalise pricing, structure, and other relevant terms and conditions for a proposed merger of the three entities and the creation of a mega Islamic bank.

On the prospects of the creation of a mega Islamic bank, Dato’ Ahmad Zaini bin Othman, President and Chief Executive Officer of MBSB said, “The opportunity to be a part of a mega Islamic bank is exciting for us and we want to take this forward.”

Here’s more from CIMB Group, RHB Capital, and MBSB:

The exclusivity agreement comes with an automatic extension provision upon submission to Bank Negara Malaysia on the proposal.

"We believe that there is inherent value and that there will be many opportunities which will arise from this proposed merger. We hope to explore this further through our discussions," said Kellee Kam, Group Managing Director, RHB Capital.

"There is a prima facie case for a value-creating merger between the three entities and we want to get into detailed discussions to validate it," added Dato’ Sri Nazir Razak, Group Chief Executive, CIMB Group.

CIMB Group, RHB Capital and MBSB shares will resume trading on Bursa Malaysia on 11 July 2014.