A prolonged row between Southern and Bumiputra-Commerce, the second- biggest lender in Malaysia, could be "potentially value destructive," Killinghall, which has a controlling stake in Southern, warned.

"Given the current circumstances and urgency of the matter, the board has decided to exercise the rights of the company as a major shareholder of Southern and call [an extraordinary general meeting]," Killinghall said.

After a marathon board meeting, Killinghall said the EGM of shareholders will seek the removal of four of Southern's seven directors and approve the Bumiputra-Commerce bid.

The four are executive director Tengku Zaitun Tengku Mahadi and independent directors - Ian Craig Buchanan, Nicholas Spiro Zefferys and Sieh Lee Mei Ling.

Killinghall, which owns about 16.4 percent of Southern, wants to replace them with lawyer Mohammed Adnan Shuaib, corporate figures Kua Sian Kooi, Ahmad Riza Basir and former central bank deputy governor Huang Sin Cheng.

Southern ignored Killinghall's ultimatum to hold a meeting of bank shareholders to study the Bumiputra- Commerce bid, calling it too low and proposing instead a merger plan with another bank, which sources close to Southern have identified as Maybank.

A takeover of Southern would strengthen Bumiputra-Commerce's position as Malaysia's second-biggest lender and could spark a new wave of banking mergers.

Killinghall said it was extremely disappointed with Southern's stance.

"The Southern board should not stand in the way and should not be afraid to bring this important decision to the shareholders of Southern," it added.

"As the ultimate owners of Southern, it is the shareholders who should be called upon to decide the fate of Southern's future."

Killinghall is controlled by Sultan Sharafuddin Idris Shah, the ruler of Malaysia's central state of Selangor, and former Southern chairman Syed Mohamad Yusof, two substantial Southern shareholders who were earlier in direct talks with Bumiputra- Commerce to sell their stakes.

Chua Ma Yu, a 53-year-old former stockbroker, also has a direct 17.5 percent stake in Killinghall as of February 8, exchange filings show.

He acquired a direct stake of 14.2 percent in Killinghall two months ago, and was subsequently made deputy chairman of Killinghall. REUTERS