If BCHB take over Southern bank : Who pay for it?

Posted On 15/02/2006

Filed under Food for thoughts

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Southern Banks board just reject BCHB (Bumiputra commerce holding berhad) offer on taking over Southern bank. You can read the latest news here.

Before asking the question of rejection, first, we must ask one question : who will pay for it.

Since BCHB don’t have the volume of cash flow to buy over Southern bank, they must source it from elsewhere. As mentioned in the news, BCHB pay RM3.08 in cash and together with RM1 redeemable convertible unsecured loan stocks (RCULS) .

The RCULS come will give 2.5% interest per annum with convertible price of RM6 per BHCB share at over 24 months.

It might sound attractive in the eye of BCHB, but not the invester!

Just do the math your will know :
BHCB share price ~ RM5.80

RCULS cost RM1 with unknown par value . To convert the RCULS to BHCB share, you must pay RM6.00, or RM0.20 more than buying it from open market. Furthermore, the 2.5% interest is laughable, anyone can tell you that if you buy bank shares like Public bank, Southern bank, you will yield a dividens higher than 2.5%.

Furthermore, BHCB are yet to annouce the par value. (RCULS Par value is the amount of money per RCULS you can redeems from the issuer).

At the end, the whole practice will raise a question, “Who will pay for it?”. A prudent investor will not buy the story!

If some entity force the take over using political power, somebody help subscribe the RCULS, which can be seen as STUPID or CHARTIY, depends how the local media describe it. In Bolehland, we know there is only ONE “potential” organisation that will do this kind of “charity” works.

Unless politikus can stay clear from the EPF this round, otherwise you will see our EPF interest will drop to a new low.


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