The star headline today reported that the Southern Bank Bhd (SBB) board of directors accepted yesterday the RM6.7bil offer by Bumiputra-Commerce Holdings Bhd (BCHB).
The Star Business Section also carried similar head lines .
After the acceptance. Southern Bank Berhad will be eliminated like Ban Hin Lee Bank, whereas Bumiputra-Commerce Bank will have more branch.
The Star commented that Merger will fit into BCHB scheme of things. It further reported that Three SBB members invited to boards of BCHB firms .
Obviously, for business community, loan from Bumiputra-Commerce Bank is much more easy than to get a loan from Southern Bank Berhad. However, in a time where Bank Negara Malaysia implement Deposit Insurance System and would not rescue any bank that collapse. A depositor in Southern Bank Berhad feel more secure to deposit money in SBB than in Bumiputra-Commerce, as Bank Bumiputra have a few record of unable to survive in recession.
CIMB have to borrow RM4 billion to acquired Southern Bank Berhad! Does this make the merged entity more stable financially?
A good managed public transport company Park May has been taken over by UEM Group 10 years ago to "restructure" the public transport system in Klang Valley. UEM group has to borrow to finance the acquisition and whereas Park May borrowed money to replace all old buses with new buses. Price hike immediately announced after the takeover. Bus fare has increase few time after that but Park May still in huge loss. Bus service become less frequent as the company try to cut cost by reducing the trip, but this also unable to save the company.
Eventually, government has to come in to to bail out Park May from UEM group and Intra-Kota from DRB-Hicom Group.
Now, Bumiputra-Commerce Bank choose to acquire and eliminated a good managed bank rather than a bank with more Non-performing loan(NPL) like Affin Bank. This is like a Park May take over that eliminate good managment from a good running company.
As a banker, CIMB group should know that using gearing to acquire another company is a risky move. Malaysian really pray that the merged BCB-SBB would not become another Park May. As government now do not have financial strength to bail out a fail company. A merged large group also difficult for government to swallow financially. Government should try every effort to prevent such thing happen as the bank might be acquired by foreigner after the liberalisation in banking industry if such incident occur.
Ex-shareholder of Park May. After spending many year of building up the company have force to dispose off and leave the company. They are happy now as they keep a huge money now paid by the acquirer. However, public and the consumer has to suffer as there do not have the service of such a experience and good managed operators.
Of course, like Park May, this unlikely to happen in next 6 years. However, according to history of Bank Bumiputra, to survive another 12 year is a real test.
Hope the management of Bumiputra-Commerce Bank would not make the SBB shareholder laughed after 12 years!!!
Updated: dinzlink.net:BCB+SBB=CIMB?
smallandmedium.blogspot.com : southern bank another one bites dust
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