KUALA LUMPUR: EON Capital will delay a shareholder meeting to vote on a buyout offer from Hong Leong Bank, sources with direct knowledge of the matter said, raising the risk its suitor would have to lift its bid or walk away, Reuters reports.
EON Capital, expected to announce the date of the meeting on Tuesday, June 22 put plans on hold after Hong Kong-based private equity fund Primus Pacific Partners, its biggest single shareholder with a 20 percent stake, said it filed a lawsuit on Monday to block the $1.6 billion deal.
Hong Leong, seeking to salvage its plan to create Malaysia's sixth largest lender, in return put pressure on EON Capital, saying it may walk away from the deal if it does not have shareholder approval by August 15.
The tight deadline raises the chance Hong Leong would raise its bid to move the deal forward but also creates a clear downside risk for EON Capital shareholders that it walks away from the deal, analysts said.
"For now, the share price is capped by the 7.3 ringgit offer price and if this issue is not resolved quickly, there could be a knee-jerk reaction to sell," David Chong, an analyst at the research unit of RHB Investment Bank said.
"Shareholder relations have clearly broken down at EON and it will take time to repair so that's definitely a risk," said Chong, who considers Hong Leong's offer too low and sees it possible EON would reject it to force a higher offer.
At 0213 GMT, EON Capital shares were unchanged while Hong Leong was down 0.5 percent, in line with the broader market.
Hong Leong first offered to buy EON Capital in January but was rebuffed by a board that considered its offer too low. EON shareholders then replaced many the firm's board members and the new directors backed Hong Leong's raised bid.
But Primus said the new bid was still not good enough, alleging that the new board members acted in the interest of some shareholders against the interest of others, and the offer was unlawful. A court has set a July 6 date to hear its case.
OSK Research analyst Keith Wee sees a clear downside risk from the delay.
"Assuming that Primus was successful in its legal suit and the offer from HLBank is reversed, we may revert back to our fundamental fair value of 6.80 ringgit," he said in a note.
EON Capital said late on Monday that it would seek legal advice over the suit. The firm declined to comment on Tuesday but will hold its annual general meeting on Tuesday where it is expected to address the issue.
Hong Leong declined to comment when contacted by Reuters.
EON Capital, expected to announce the date of the meeting on Tuesday, June 22 put plans on hold after Hong Kong-based private equity fund Primus Pacific Partners, its biggest single shareholder with a 20 percent stake, said it filed a lawsuit on Monday to block the $1.6 billion deal.
Hong Leong, seeking to salvage its plan to create Malaysia's sixth largest lender, in return put pressure on EON Capital, saying it may walk away from the deal if it does not have shareholder approval by August 15.
The tight deadline raises the chance Hong Leong would raise its bid to move the deal forward but also creates a clear downside risk for EON Capital shareholders that it walks away from the deal, analysts said.
"For now, the share price is capped by the 7.3 ringgit offer price and if this issue is not resolved quickly, there could be a knee-jerk reaction to sell," David Chong, an analyst at the research unit of RHB Investment Bank said.
"Shareholder relations have clearly broken down at EON and it will take time to repair so that's definitely a risk," said Chong, who considers Hong Leong's offer too low and sees it possible EON would reject it to force a higher offer.
At 0213 GMT, EON Capital shares were unchanged while Hong Leong was down 0.5 percent, in line with the broader market.
Hong Leong first offered to buy EON Capital in January but was rebuffed by a board that considered its offer too low. EON shareholders then replaced many the firm's board members and the new directors backed Hong Leong's raised bid.
But Primus said the new bid was still not good enough, alleging that the new board members acted in the interest of some shareholders against the interest of others, and the offer was unlawful. A court has set a July 6 date to hear its case.
OSK Research analyst Keith Wee sees a clear downside risk from the delay.
"Assuming that Primus was successful in its legal suit and the offer from HLBank is reversed, we may revert back to our fundamental fair value of 6.80 ringgit," he said in a note.
EON Capital said late on Monday that it would seek legal advice over the suit. The firm declined to comment on Tuesday but will hold its annual general meeting on Tuesday where it is expected to address the issue.
Hong Leong declined to comment when contacted by Reuters.
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