RHB battle highlights PE challenges in Malaysia

Last week, top Malay banks Maybank and CIMB each received regulatory approval to bid for RHB Capital, the country's fifth-largest lender by assets. With the two banks reportedly willing to pay MYR20 billion ($6.65 billion) in a full takeover deal, Carlyle and TPG may lose out in their purported $1.6 billion bid for Abu Dhabi Commercial Bank's (ADCB) 25% stake in RHB.

"It's a shallow market," one Malaysia-based GP says. "There's too much local money and easy bank funding, which crowds out private equity."

A victory for either Maybank or CIMB would alter the Southeast Asian banking market considerably - the status of Singapore's DBS as the region's largest lender would come under threat - but the process is still in its nascent stages. Although the two groups have apparently received permission to talk to RHB, CIMB's CEO said talks have yet to begin. Further, a Reuters report from Monday suggests that ADCB is planning to proceed with its 25% share auction, with Japan's Sumitomo Mitsui Financial Group emerging as the biggest competition for a private equity bidder.

If private equity is bypassed it won't be the first time in Malaysia. Last month, Navis Capital Partners reportedly dropped its pursuit of glove maker Latexx Partners after talks on acquisition terms failed. Latexx had earlier accepted an offer of RM3.10 per share, valuing the company at RM852 million ($279 million). Likewise, Navis was previously a contender for Carrefour's $1 billion worth of Southeast Asian assets, which included 23 Malaysian supermarkets, but pulled out before the final round of bidding.

"Big-time deals are very political and local corporations have too much firepower to allow PE to take a meaningful role," one Southeast Asia-focused LP tells AVCJ. "I've always felt that deals which are small in scale, like $100 million, are hard to do as well. Entry is difficult, and exit is too."

Government-linked Ekuinas Nasional Berhad has responded by trying to generate momentum in the industry. Its efforts include the creation of a RM513 million ($169.5 million) vehicle, backed by three fund managers, CIMB Private Equity, KFH Asset Management and Navis Capital Partners.

Shortly after the latter fund launched, Navis also announced the first investment from its RM230 million ($76 million) Malaysian Growth Opportunity Fund I. The target, lifestyle and baby-care product retailer Kinderdijk Group, doesn't equate to a multi-billion-dollar bank, but the deal perhaps suggests that private equity is finding its bearings in Malaysia.

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• Topics
• Southeast Asia
• Financing
• The Carlyle Group
• TPG Capital
• Navis Management