KUALA LUMPUR: AMMB Holdings Bhd, one of the country’s largest banking groups, has entered into a conditional share sale agreement with MBf Holdings Bhd and two of its subsidiaries for the proposed acquisition of 100% interest in MBF Cards (M) Sdn Bhd for RM623.4 million cash, the companies said in filings with Bursa Malaysia yesterday.
MBf and its wholly-owned subsidiaries Atox Cards Sdn Bhd and Jastura Sdn Bhd have direct interests of 51%, 11.55% and 37.45% in MBF Cards, which owns the business of cards issuing, merchant acquiring and bill payments business under Visa and MasterCard licences.
AMMB, the parent company of AmBank (M) Bhd, will purchase MBF Cards’ entire issued and paid-up share capital of 5.27 million RM1 shares. The transaction will also include MBF Cards’ 33.3% interest in Bonuskad Loyalty Sdn Bhd. Bonuskad’s principal business involves conducting customer loyalty schemes as principal or agents on behalf of participating companies.
The agreement is conditional upon the disposal of MBF Cards subsidiaries, namely MBf Building Technology Sdn Bhd, MBf Card and Travel Network Sdn Bhd and MBf Discount Card Sdn Bhd, as well as all immovable properties to MBf Holdings.
“This acquisition enhances the profile of our merchant acquiring and card issuance businesses with a greatly enlarged merchant network and an increase in receivables.
“It also fits well with our retail banking strategic priorities and aspirations, including stronger customer centricity, accelerating growth in deposits and non interest incomes, building our wealth management and growing quality assets in targeted segments,” AMMB chairman Tan Sri Azman Hashim said in a statement. The acquired business would also provide opportunities in accelerating growth in the group’s recurring non-interest income, he added.
According to AMMB, the purchase price of RM623.4 million is based on the company’s net asset value (NAV), the prospect of revenue and earnings growth, the number of issuing cards in circulation, the number and wide network of existing merchants and the possible synergy benefits accruing from the acquisition.
It said the purchase price is referenced against the NAV of MBf Card and the share of earnings of Bonuskad as at Dec 31, 2010 of RM207.2 million and RM5.1 million respectively.
This translated into a price-to-book multiple of 2.9 times and a price-earnings ratio of 10.9 times. Based on audited consolidated financial statements ended Dec 31, 2011, MBF Cards had a reported net profit of RM50.18 million and NAV of RM238.43 million.
As MBF Cards is governed under the Payment Systems Act 2003 and supervised under the Payment System Policy Department of Bank Negara Malaysia (BNM), the transaction is subject to BNM approvals as well as shareholders of both Atox Cards and Jastura.
“With greater than 45,000 merchants-in-force, this will clearly make AmBank the top three merchant acquirer in Malaysia. Additionally, the multiple franchises and licences such as MasterCard, Visa, e-Debit, Japan Credit Bureau and China Union Pay will provide a more complete suite of payment card acceptance for our extensive merchant network,” said AMMB group managing director Ashok Ramamurthy.
He said the acquisition would result in card receivables increasing to RM2.3 billion. Furthermore, it would give the group full control over the line of credit (LOC) business model, allowing its AmBank card brand to be used with greater control over marketing and card positioning.
The LOC arrangement, he added, meant that AMMB would provide financing to MBF Cards’ cardholders till mid-2017.
“Through the Bonuskad acquisition, we will also have access to a seven million strong customer database of the Bonuslink loyalty card which would present good cross-selling opportunities,” Ashok said.
This article appeared in The Edge Financial Daily July 11, 2012.