Is Shazhou's acquisition of Effen Holdings changing the situation?

“The Edge” today quoted sources as saying that the Sarawak side has delayed the signing ceremony in order to confirm some of the conditions set by the National Bank of China for the relevant exchange.

However, sources indicated that both parties to the deal will still sign a Memorandum of Understanding (MOU) today. According to information, Shazhou Prime Minister Tan Sri Abon Zohari and some senior state officials have arrived in Kuala Lumpur.

“They originally expected to come to Kuala Lumpur to sign a formal transaction agreement, but now they have signed a memorandum of understanding.”

According to earlier media reports, the Sarawak government intends to acquire a large number of shares in Effen Holdings from LTAT and increase its shareholding from the current 4.8% to 30% in one go.

After completing the deal, the Shazhou government will surpass LTAT and become the largest shareholder of Effen Holdings.

The deal requires approval from the Bank of China, and “The Edge” also quoted sources on July 1, saying that the Bank of China has conditionally approved the deal.

“It's still unclear what the relevant conditions are, but I don't expect that to cause the deal to collapse. “The Edge” learned that the Bank of China has no opinion on the Shazhou government increasing its holdings of Effen Holdings to 30%, making it the largest shareholder.”

An unnamed industry insider told “The Edge” that the Bank of China's approval included specific conditions, indicating that Shazhou may not have obtained everything they wanted from this deal.

“The problem may be that the Bank of China allows the Shazhou government to hold Effen Bank, but it cannot obtain control of the relevant banks. The Bank of China may require separation of shares and control of Effenbank and guarantee the bank's future corporate supervision.”

While attending an event in Kuching on July 5, Abon Zohari told the media that there will be a signing ceremony on July 19. At that time, the Shazhou government will acquire the main shares of “one bank.”

As the Shazhou government's plan to increase shareholding nears implementation, Effen Holdings has soared sharply since July 5, reaching a maximum of RM2.99 when the market closed on July 16. Compared with RM2.48 when the market closed on July 4, it soared 51 cents or 20.56%.

However, after news of changes in the transaction came out today, Effen Holdings plummeted in early trading. As of 12:30 p.m., the stock was temporarily reported at RM2.77, down 20 cents, or 6.7%.