EPF not allowed to vote in RPT

Bursa has made its final decision, EPF is not allowed to vote in the CIMB-RHB Capital-MBSB deal. The reasons behind this can be found here:


EPF’s position is not the same as the other shareholders of RHB Capital premised on the
following:

(a) EPF’s controlling stakes in RHB Capital (41.5%) and MBSB (64.5%) place it in a position of significant influence in these companies;

(b) as the single largest shareholder of RHB Capital and MBSB and a major shareholder in CIMB Group, EPF may benefit from the transaction as a shareholder of MBSB and/or CIMB Group. As such, its overall position would differ from a party who is merely a shareholder of RHB Capital, especially given the differing terms and valuations applicable to the 3 affected companies; and

(c) EPF has prior knowledge of the Proposed Merger as it was notified by CIMB


I think that this decision is spot-on. I think that EPF should be able to block the whole deal if it thinks it is in their disadvantage.

But given that the EPF does indeed support the deal, it should not be able to push the deal through by being allowed to vote. This is after all a Related Party Transaction (RPT), and it is one of the Corporate Governance areas of great worry in Malaysia.

EPF has different percentages in each of the three companies, which means that it has a clear preference in the outcome: a relatively higher valuation for the company it has a large stake in, and vice versa.

If subsequently the minority investors shoot the proposal down, then may be it isn't that great anyhow.

Many corporate restructure exercises do disappoint, the outcome being less good than forecasted by the dealmakers who made the shiny PowerPoint presentations, showing all the synergy.

In reality, things are not that easy, cultural clashes of the employees of the different companies are quite common and economies of scale do not always work as expected.


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