Merging and Acquisition Activity in Malaysia

CHAPTER 1

INTRODUCTION

1. Background of the study

1. Merging and Acquisition Activity in Malaysia

Mergers and acquisitions of financial services in Malaysia are recent phenomena for Malaysia. As early as 1932, Malaysia (then known as Malay States) witnessed the merger of Ho Hong Bank, The Chinese Commercial Bank and the Oversea Chinese Bank to form Oversea Chinese Banking Corporation (OCBC). In 1960’s, Hong Kong and Shanghai Bank had procured the whole share capital of the Mercantile Bank while Chartered Bank acquired the Eastern Bank (Drake, 1969). Mergers & acquisitions in Malaysia are primarily governed by the Capital Markets and Services Act 2007, the Malaysian Code on Take-Overs & Mergers 2010 and its practice notes as well as the Guidelines on Contents of Applications relating to Take-overs and Mergers.

Capital Market and Services Act 2007 regulates and provides for matters relating to the activities of markets and intermediaries in the Malaysian capital markets. Capital Market and Services Act empowers the Securities Commission Malaysia to make recommendations to the Finance Ministry and to administer the Mergers & Acquisitions according to the objectives under the Capital Market and Services Act. The Capital Market and Services Act also provides for necessary acquisition in a takeover and rights of minority shareholders under such a situation.

The Mergers & Acquisitions is issued and administered by the Securities Commission Malaysia and is enacted pursuant to section 217 of the Capital Market and Services Act. The Mergers & Acquisitions is applicable when the target company is a Malaysian public company (whether or not listed of any stock exchange), or a real estate investment trust or a foreign company that is listed on Bursa Malaysia Securities Berhad and would apply where such company or trust is subject to a merger and acquisition exercise. As such, a takeover offer must be in compliance with the provisions and any ruling made by the Securities Commission Malaysia.

While the Capital Market and Services Act mainly govern the processes and procedures of a Code Takeover offer, the Companies Act provides for inter alia the conduct and affairs of companies, director’s duties and disclosure requirements on substantial shareholding in a company.

There are a number of regulatory bodies that are tasked during Mergers & Acquisitions process. Firstly, the Securities Commission was established under the Securities Commission Malaysia Act 1993. Its function includes encouraging and promoting the development of the capital markets in Malaysia through the regulation of all matters relating to the securities industry. The Securities Commission has wide rule-making and enforcement powers which ensuring compliance with the provisions of securities laws, including the Capital Market and Services Act.