Why may Quek wants EONCap

How high a price Quek is willing to pay for EONCap will depend on how badly he wants to merge the two banking groups.

The biggest attraction for Quek is that a merger between HLBB and EONCap will enable the merged group to compete in an environment where competition is heating up very fast as libersailisation gathers pace.

There is, however, a view that Quek could be bulking up his banking operations domestically for bigger things in time to come.  The merger will immediately raise HLBB to a higher platform, perhaps putting it in a strong position to acquire Public Bank should the opportunity arises, an industry observer notes. 

Be that as it may, banking analysts say Quek has been making some really aggressive moves of late to propel both the Hong Leong Financial Group and Guoco Group to a higher platform regionally.  HLBB has been making inroads into China and Vietnam, and there are rumours it is trying to get into Thailand as well.  HLBB is the only Malaysian bank with a licence to operate a bank in Vietnam.

Quesk's strategy, according to an industry observer, is that for HLBB to become a significant player in the region, it has to be a bigger and stronger domestic player first.  This is more so when under the new Basel 2 framework, financial strength is key.  "This is why he wants scale for HLBB - it will give him the financial muscle to expand regionally... the move to buy EONCap and merge it with HLBB is all part of this bigger picture," he says.

How will Quek pay?

At RM8 a share, HLBB would have to fork out RM5.5 billion for a 100% stake in EONCap, says OSK Research.  The purchase, though, may not be entirely in cash, and could be in the form of equity and cash.