KUALA LUMUPUR: Berjaya Corp Bhd (BCorp) has been given the green light by the Ministry of Finance (MoF) to sell a 40% equity stake in Berjaya Sompo Insurance Bhd (BSompo) to Sompo Japan Asia Holdings Pte Ltd.
In an announcement to Bursa Malaysia yesterday, BCorp said its unit Berjaya Capital Bhd (BCap) had received a letter from Bank Negara stating that the MoF had approved the proposed disposal.
Currently, BCap holds 70% shareholding in BSompo while Sompo Japan owns the remaining 30% in the insurer. Upon completion of the divestment, BCap’s stake in BSompo will be pared down to 30%, which will make it an associate company.
Sompo Japan, meanwhile, will have a controlling 70% stake in BSompo. The announcement did not reveal the price tag for the divestment. “A detailed announcement will be released soon once the respective parties enter into a definitive agreement on the proposed disposal,” said BCorp.
Since the liberalisation of foreign ownership in the local insurance industry, a few transactions have been done at hefty premiums, in the range of 1.8 to 2.2 times of respective insurers’ book values.
Jerneh Asia Bhd sold its 80% stake in Jerneh Insurance Bhd for RM523.2 million cash to ACE INA International Holdings last October, valuing the general insurer at above two times book value.
PacificMas Bhd disposed of its insurance arm, Pacific Insurance Bhd, to Fairfax Asia Ltd at RM216.5 million, representing price-to-book multiples of 1.57 times based on the net tangible assets (NTA) of Pacific Insurance of RM137.98 million.
This is the second deal that the Berjaya group boss Tan Sri Vincent Tan has clinched after the government liberalised ownership, allowing up to 70% foreign shareholding in stockbroking firms and insurance companies.
Prior to that, Tan had inked an agreement to sell 70% of his stockbroking outfit, Inter-Pacific Securities Sdn Bhd (Inter-Pac), to Singapore-based Kim Eng Holdings Ltd.
However, in view of Malayan Banking Bhd’s offer to privatise Kim Eng, BCorp is currently in talks again to possibly sell its entire stake in Inter-Pac. Berjaya group has been in the news of late.
Apart from a surprise move by Tan taking Berjaya Retail Bhd private after barely seven months of floating its shares, speculation is rife on how Tan will redeem a chunk of RM711 million in exchangeable bonds issued by Berjaya Land Bhd (BLand) come August.
BLand’s prime asset is its equity stake in number forecast operator Berjaya Sports Toto Bhd (BToto). Indeed, the bonds are exchangeable for BToto shares at a price of RM5.049 per share. The exchangeable price was originally RM5.19, but was adjusted in view of BToto share price trend.
If the RM711 million of bonds were to be converted at RM5.049, BLand would have surrendered 140.8 million shares, or about 10% shareholding in the gaming outfit. However, it is unlikley that BLand want to give up such big block of shares in its cash cow.
BToto’s share price has been hovering between RM4 to RM4.50 in the past 18 months. Hence, analysts reckon it is unlikely that the bondholders would want to convert the debt papers into BToto shares. It is also noteworthy that BLand has been trimming its stake in BToto,
selling shares in the open market while BCorp is accumulating shares in the number forecast operator. By doing that, this could possibly allow the spare cash to flow down to BLand, said some industry observers. As at April 29, BLand held a 42.6% equity stake in BToto, down from 43.4% a year ago.