Type	Announcement
Subject	Malayan Banking Berhad ("Maybank" or "the Company") - Proposed Merger With PhileoAllied Berhad Under A Shareholders Scheme Of Arrangement Pursuant To Part VII (Arrangement And Reconstructions) Of The Companies Act, 1965

Contents :

Pursuant to the Memorandum of Understanding signed on 3 March 2000, Aseambankers Malaysia Berhad ("Aseambankers") on behalf of Malayan Banking Berhad ("Maybank"), is pleased to announce that Maybank has entered into a Memorandum of Agreement ("Memorandum") with PhileoAllied Berhad ("PAB") for a proposed merger ("the Proposal") under a shareholders scheme of arrangement ("the Scheme") pursuant to Part VII (Arrangement And Reconstructions) of the Companies Act, 1965.

The Memorandum outlines the structure of the Scheme for the Proposal, and the principal terms under which it will be implemented, as agreed to by the Parties.

The Proposal involves an offer from Maybank to effect a merger between PAB's and Maybank's respective financial services businesses through the Scheme to be proposed to the shareholders of PAB. The proposed merger, under the Scheme, shall be effected by a share exchange ("the Share Exchange") upon the terms inter alia set out below.

The Share Exchange shall involve Maybank issuing new ordinary shares of Maybank ("the Consideration Shares") for all the shares in PAB on a fully diluted basis ("the Offer Shares") in accordance with the Exchange Ratio.



The Exchange Ratio shall be such that each Offer Share shall be exchanged for one-sixth (1/6) of a Consideration Share, or conversely, each Consideration Share shall be exchanged for six (6) Offer Shares. The issue price of each Consideration Share shall be RM15.00.

The Offer Shares shall comprise all of the following:

i the entire issued and paid-up share capital of PAB comprising of 357,456,552 ordinary shares of RM1.00 each as at 31 January 2000;
ii such number of ordinary shares of PAB that may be issued pursuant to the conversion of all outstanding Irredeemable Convertible Unsecured Loan Stocks 1996/2001 ("ICULS 1996/2001") which upon such conversion shall comprise a maximum 50,109,219;
iii such number of ordinary shares of PAB that may be issued pursuant to the conversion of all outstanding Irredeemable Convertible Unsecured Loan Stocks 1999/2004 ("ICULS 1999/2004") which upon such conversion shall comprise a maximum 68,268,388; and
iv such number of ordinary shares of PAB that may be issued pursuant to the exercise of any options granted and subsisting under the existing Employee Share Option Scheme ("ESOS") of PAB as at the date of the Memorandum.

The conversion of all existing ICULS issued and outstanding by PAB and the Scheme shall be inter-conditional. The total number of shares of PAB to be exchanged under the Proposal will involve up to 475,834,159 ordinary shares representing the total fully-diluted share capital of PAB excluding the shares issuable by the ESOS.

The proposed issue price of RM15.00 per Consideration Share is at a discount of 1.8% to weighted average market price of RM15.27 for the five (5) days to 29 June 2000 being the last trading day for Maybank shares prior to the announcement of the Proposal on the KLSE.

The Exchange Ratio was arrived at taking into account the due diligence findings, PAB’s market value and the audited net tangible assets of PAB as at 31 January 2000. It also takes into consideration the future earnings potential of PAB.

Based on the proposed terms of the Proposal, the value of RM2.50 per Offer Share represents:

¨ a discount of 3.1% to the last transacted market price of PAB shares of RM2.58 as quoted on 29 June 2000 - the last trading day for PAB shares prior to the announcement of the Proposal on the Kuala Lumpur Stock Exchange ("KLSE")
¨ a discount of 3.1% to the weighted average price of PAB shares of RM2.58 quoted for the five (5) days to 29 June 2000 - the last trading day for PAB shares prior to the announcement of the Proposal on the KLSE
¨ approximately 1.21 times the proforma fully diluted shareholders’ funds of RM984.1 million as at 31 January 2000 (taking into consideration the conversion of all ICULS into ordinary shares)




Based on the total number of Offer Shares of 475,834,159 shares, the Exchange Ratio and the issue price per Consideration Share of RM15.00, the transaction is valued at approximately RM1,190 million in total.

The Consideration Shares to be issued pursuant to the Share Exchange will rank pari passu in all respects with the then existing ordinary shares of RM1.00 each in Maybank except that they will not be eligible for any dividends declared or paid in respect of any period prior to the issue of the Consideration Shares.

3. CONDITIONS PRECEDENT

The Proposal and the Scheme expressed in the Memorandum are subject to and conditional upon, inter alia, the followings being fulfilled:

(a) the terms of the Trust Deeds for all existing ICULS issued by PAB being varied to provide for compulsory conversion of all ICULS to ordinary shares of PAB conditional upon the Scheme being approved by the shareholders of PAB;
(b) all relevant approvals, including the following being obtained:

i Minister Of Finance/Bank Negara Malaysia ("BNM");
ii Foreign Investment Committee ("FIC");
iii Securities Commission ("SC");
iv KLSE for the listing of and quotation for new Maybank shares to be issued;
v the High Court of Malaya and Borneo pursuant to Part VII (Arrangement and Reconstruction) of the Companies Act, 1965;
vi shareholders of Maybank at an Extraordinary General Meeting to be convened for the Proposal (if required); and
vii PAB shareholders’ approval and, if necessary, ICULS holders, and other creditors’ approval.

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4. RATIONALE FOR THE PROPOSAL

The impending globalisation and liberalisation of the financial industry will continue to pose great challenges to Malaysian financial institutions. To attain its long-term objective of a sound and resilient financial system, the government is encouraging financial institutions to rationalise and consolidate. Local financial institutions and stockbroking companies are currently undergoing various mergers and consolidation exercises to address these challenges ahead.

Following the exercise, it is intended that the commercial banking business of PAB under PhileoAllied Bank (Malaysia) Berhad ("PhileoAllied Bank") and securities business under Phileo Allied Securities Sdn Bhd ("Phileo Allied Securities") will be merged with that of Maybank and Mayban Securities Sdn Bhd, respectively.



The Proposal, upon completion, will provide Maybank with opportunities to synergise and enhance its financial services in the areas of banking, stockbroking, bancassurance and investment management. In addition, the combined entity will be able to benefit from economies of scale and synergies through cross selling of its products and services to an enlarged customer base. This Proposal is in tandem with Maybank’s strategy to further strengthen its position as the preeminent financial services group in Malaysia.

5. BACKGROUND INFORMATION

MAYBANK

Maybank was incorporated in Malaysia on 31 May 1960 with an authorised share capital of RM20 million and an issued and paid-up share capital of RM7.5 million initially. As at 30 June 1999, Maybank has an authorised share capital of RM4 billion and issued and paid-up share capital of RM2.309 billion, with a Group shareholders’ funds of RM9.217 billion and total assets amounting to RM117.479 billion.

Maybank is principally engaged in commercial banking business whilst its subsidiary companies are engaged in merchant banking, finance, leasing, hire-purchase, general and life insurance, discount house business, factoring, stockbroking, venture capital, trustee, nominee services, property trust, unit trust and futures broking.

PAB

The Wilkinson Process Rubber Company ("WPRC") was incorporated on 18 May 1926 as a limited company in the Federated Malay States. The name of WPRC was changed to Linatex Process Rubber Berhad on 31 March 1990 and subsequently to PAB on 5 September 1994.

Following a major restructuring exercise which was completed on 26 May 1994, PAB was transformed into an integrated financial services company with commercial banking and stockbroking as its main activities.

Currently, PAB is principally involved in the investment holding and provision of management services whilst its subsidiary companies are involved in stockbroking, commercial banking, investment holding, nominees services, corporate finance, property development, information technology and computer services.

PhileoAllied Bank and Phileo Allied Securities are the wholly owned subsidiaries of PAB and are currently involved in commercial banking business and stockbroking business, respectively. Currently, PhileoAllied Bank has 32 branches (including bank's kiosks) nationwide. Phileo Allied Securities is based in Ipoh, Perak and has a branch research office in Kuala Lumpur. Phileo Allied Securities is a full-service stockbroking house that offers a comprehensive range of products and services to local and international institutional clients and retail customers.

6. FINANCIAL EFFECTS

6.1 Share Capital

The Proposal will have the following proforma effect on the share capital of Maybank:

	RM'000	% of enlarged share capital
Existing paid-up share capital as at 9 June 2000	2,337,106	96.7
New share capital issued pursuant to the Proposal	* 79,306	3.3
Total	2,416,412	100.0

* Based on the total number of Offer Shares of 475,834,159 shares and assuming the outstanding options granted under PAB’s ESOS are not exercised into PAB ordinary shares

6.2 Earnings 

Assuming the Proposal will be completed by the end of calendar year 2000, there will be no impact on the consolidated earnings of Maybank for the current financial year ending 30 June 2000. However, the Proposal is expected to contribute positively to the future earnings of Maybank.

6.3 NTA

The Proposal is not expected to have any material effect on the NTA of Maybank.

7. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Insofar as the Directors of Maybank are aware, none of the Directors or substantial shareholders of Maybank or any person connected with them has any interest, direct or indirect, in the Proposal.

8. DIRECTORS’ OPINION

After due consideration of all aspect of the Proposal, the Board of Directors of Maybank is of the opinion that the Proposal is in the best interest of Maybank.

9. APPLICATION TO THE SC

Barring unforeseen circumstances, the application to the SC will be made within four (4) months from the date of this announcement.

10. ADVISERS

Aseambankers Malaysia Berhad and J.P. Morgan Securities Asia Pte. Ltd. act as financial advisers to Maybank.

11. DOCUMENTS FOR INSPECTION

The Memorandum is available for inspection at its Registered Office, 14th Floor, Menara Maybank, 100, Jalan Tun Perak, 50050 Kuala Lumpur, during normal business hours from Monday to Friday (except for public holidays) for a period of three (3) months from the date of this announcement.

 

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