Ambanks’ placement

AMMB Holdings Bhd (Ambank)’s recent placement exercise is a notable one for a few reasons.

For one, it was done at a price of less than half its book value, giving the investors who took it up a rare chance to get 10% of the bank at such a low price.

The share placement proposal came slightly more than one month after Ambank reached an agreement with the Ministry of Finance to pay Rm2.83bil as settlement for transactions the bank was involved in, with regards to the 1MDB issue.

Secondly, and if going by market talk, the placement was taken up largely by investors that include Datuk Seri Nazir Razak and Tan Sri Chua Ma Yu or funds linked to them.

Both of them are iconic names in the Malaysian banking scene.

This is where the story could get interesting.

Could the move be a precursor to a potential merger and acquisition (M&A) involving Ambank?

For some time now there has been speculation that the banking group is a potential M&A candidate considering that its major shareholders, namely Tan Sri Azman Hashim and Australia’s ANZ Group are said to be not averse to such an exercise. Such an M&A exercise has weight.

Note that Ambank had also recently announced that it is assessing the carrying value of Rm2.09bil of goodwill.

In response to this, research house CLSA says that the goodwill review suggests a clean up that not only would help the placement exercise, but is also seen as a move to remove hurdles should Ambank seek any M&A potential.

However if it is true that the recently placement of Ambank’s 10% went largely to individuals, it would have irked two parties.

One would be minority shareholders who would suffer a dilution and secondly, the large institutional shareholders who were not offered a chance to participate in the share placement exercise, considering the attractive pricing of the stock offering.