November 20, 2013 / 9:04 PM / 4 years ago

DEALTALK-Malaysian bank CIMB scores surprise win with Australia dairy mandate

* CIMB advising Warrnambool, target in a three-way global takeover battle

* Malaysian bank launched in Australia last year after deal with RBS

* CIMB ranks second in Australian ECM this quarter - Thomson Reuters data

By Jackie Range

SYDNEY, Nov 21 (Reuters) - An advisory role in one of Australia's most contested takeover deals this year has thrown a spotlight on an unexpected debutant in local investment banking circles - Malaysia's CIMB Group Holdings Bhd.

CIMB bankers elbowed their way past familiar names in the clubby world of Australian investment banking when they clinched the sellside mandate to advise Warrnambool Cheese and Butter Factory Co, the target in a three-way global takeover battle.

The deal has put a shine on CIMB's credentials in a country where the bank's investment banking ambitions are just taking shape. Bankers at CIMB only recently celebrated its first anniversary Down Under, with red and white cupcakes - the colours of the bank's corporate logo.

Keen to depend less on its home market, Malaysia's No.2 bank by assets agreed in 2012 to buy parts of Royal Bank of Scotland Group Plc's (RBS) Asian business, including most of its Australian unit.

So far, there has been no buyer's remorse.

CIMB was the sole underwriter and bookrunner for a stake sale earlier this month worth A$503 million in the world's No.4 iron ore miner, Australia's Fortescue Metals Group Ltd.

The Warrnambool mandate had also thrust CIMB into the thick of what is now a A$505 million takeover battle. Key to that role was CIMB's ability to retain a core group of experienced investment bankers who had worked closely together under the RBS banner.

"The RBS franchise they purchased had been a longstanding part of the local scene, and had strong existing relationships," said Lachlan Colquhoun, head of markets analysis at research and advisory firm East & Partners.

"The transition team at CIMB would appear to have done well in preserving some of the relationships... while beginning to establish their very own franchise, which also has its own point of difference - the link to Asia which none of the other competing investment banks really have to the same extent."

Warrnambool already had a close relationship with RBS before CIMB took over the business, said Oscar Ludwigson, who was a senior RBS banker in Australia before becoming CIMB's head of investment banking in the country.

"We haven't got paid every year... but that's not the point. The point is that they are a client of ours and we have stayed close to them," Ludwigson said.

Warrnambool wasn't immediately available to comment on why they had appointed CIMB to advise them on the deal.

TOUGH JOB

CIMB faces serious competition in the Australian investment banking market, with RBS historically not a significant player.

The corporate advisory realm in Australia is currently dominated by Citigroup Inc, JPMorgan Chase & Co, Macquarie Group Ltd and UBS AG. Together, the banks command 65.3 percent of the market, with UBS taking the lion's share at 22.4 percent, according to East & Partners.

RBS's banking status in Australia and elsewhere was also weakened by the misfortunes of its U.K. headquarters, bailed out in a taxpayer rescue amid the 2008 financial crisis.

"CIMB didn't really take over a strong business, it was already badly weakened after several years of lack of love," a banker said, requesting not to be named talking about a competitor.

Nor has the CIMB team been helped by the bank's brand, which lacks the recognition that some of its competitors enjoy in Australian boardrooms.

"No one is going to CIMB and giving CIMB business because of the brand name. The bankers have got to persevere in spite of it," the banker said.

Now, as dairy rivals slug it out to buy Warrnambool, CIMB and its legacy RBS bankers are up against some of Australia's established investment banking names.

Among them is the chief executive of Lazard Australia, John Wylie, who is leading Murray Goulburn Co-operative Ltd's charge in the takeover battle. Wylie is a well-known investment banking figure, who in a sports-mad nation also chairs the government's Australian Sports Commission.

Also in the mix are Rabobank and Rothschild, advising Canada's Saputo Inc, while Kidder Williams Ltd is advising Bega Cheese Ltd.

Reunion Capital Partners is advising New Zealand's Fonterra Co-Operative Group Ltd, which has also tasked Goldman Sachs with helping it to buy a stake in Bega.

NEW PEOPLE

In Australia, CIMB has extended its capabilities and added new people including Aaron Lamshed, who has been helping to drive its equity capital markets business.

Ludwigson said Lamshed was integral in the Fortescue deal - a block of shares that a person familiar with the sale said was sold by Canada's Teck Resources Ltd.

That deal helped CIMB rank second in Australian equity capital markets this quarter, giving the bank a market share in the segment of 13.6 percent for the period, according to Thomson Reuters data.

CIMB may get a $4.7 million payday for its role in the Warrnambool deal, according to an estimate from Thomson Reuters/Freeman Consulting Co. Local media have reported speculation that CIMB might be paid as much as A$10 million.

Banking sources say CIMB's payout is likely to feature within that range, with the ultimate amount potentially depending on what proportion of the payout is based on a sliding incentive fee.

While banks have come under pressure to accept lower fees to win mandates in a competitive market, CIMB wasn't considered likely to have offered any more of a discount than others might have, and potentially, did not negotiate reduced rates at all given its close relationship with Warrnambool, according to banking sources.

"It's a well-deserved mandate if ever there was one," one banking source said.

Ludwigson would not comment on whether CIMB had discounted its fees to get the business.

The Warrnambool and Fortescue deals have brought more business to the bank, he said, declining to elaborate.

"We've had some early successes, that's not definitive about anything, but it is encouraging and we'd like to keep going," Ludwigson said.

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