Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on October 6, 2015.

 

KUALA LUMPUR: Malaysia’s sovereign wealth fund Khazanah Nasional Bhd is not in a rush to sell its 30% stake in Bank Muamalat Malaysia Bhd in the proposed merger with Malaysia Building Society Bhd (MBSB).

Khazanah managing director Tan Sri Azman Mokhtar said yesterday its decision is dependent on the negotiated amount its non-core holdings in the bank would garner out of the merger talks.

“We have a policy that if it’s not a core holding, we don’t really need to hold [it]. [But] we are not in a rush to sell either. It has to be at the right price, right configuration and so on,” he told reporters on the sidelines of Khazanah Nasional’s Megatrends Forum 2015. 

The Edge weekly had reported, quoting sources, that Khazanah planned to divest its entire 30% stake in Bank Muamalat in the proposed merger, and that it had been looking to sell for a long time and wanted cash to exit.

Another reason for the divestment, the weekly said, was that the central bank was not keen on the government investment arm owning major stakes in more than one bank. It already owns 29.34% in CIMB Group Holdings Bhd.

According to Azman, as Khazanah is only a 30% shareholder, it is not taking the lead in the merger talks.

“We have seen some progress in Bank Muamalat but really our partners DRB-Hicom [Bhd] and MBSB, which is owned by EPF (Employees Provident Fund), are taking the lead. Khazanah will make a decision based on whatever they decide,” he added. 

EPF owns 65% of MBSB. It also, as at July 1 this year, holds an 8.13% equity interest in DRB-Hicom.

Last Thursday, MBSB said it had obtained Bank Negara’s approval to begin merger talks with Bank Muamalat, with a three-month period to complete the talks. It was previously reported that the combined asset size of the two entities is estimated to be about RM60 billion as at end-June. MBSB’s assets are valued at about RM41 billion, and Bank Muamalat’s at about RM22 billion. 

Bank Muamalat is the country’s second stand-alone Islamic bank after Bank Islam Malaysia Bhd, and DRB-Hicom controls a 70% stake in it. When DRB-Hicom took over Bank Muamalat in 2008, the central bank had imposed a condition that its stake had to be pared down to 40%.

There has been speculation that if the merger goes through, EPF’s shareholding in the merged entity would be reduced to 40%, while DRB-Hicom’s interest would be trimmed to 20%.

MBSB’s latest attempt to merge with Bank Muamalat comes just nine months after the shelved three-way merger with banking giants CIMB Group Holdings Bhd and RHB Capital Bhd. The deal, which would have created the largest banking group by assets, was aborted in January 2015, with the parties citing unfavourable economic conditions.

DRB-Hicom (fundamental: 0; valuation: 2) closed 2 sen or 1.44% higher at RM1.41 yesterday, for a market capitalisation of RM2.77 billion. Since the announcement of the start of merger talks last Thursday, the stock has gained about 6.02%. MBSB (fundamental: 1.2; valuation: 3), which was trading at RM1.51 last Thursday and rose 5.96% to RM1.60 the next day, closed at RM1.59 yesterday, for a market cap of RM4.6 billion.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

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