This article first appeared in The Edge Financial Daily, on June 21, 2016.
KUALA LUMPUR: MAA Group Bhd, which is exiting the insurance sector in Malaysia, will be using RM290.49 million or near 74% of the proceeds from the proposed disposal of its takaful business to acquire businesses in the manufacturing and education services sectors to lift the company’s Practice Note 17 (PN17) status by end-2017.
MAA Group chief executive officer Datuk Muhamad Umar Swift told reporters after the company’s annual general meeting yesterday that MAA Group needs to find new domestic businesses to grow the group, upon completion of its takaful business disposal.
“Because we are no longer limited to financial services only, we will be looking at manufacturing, and we are interested in education services.
“However, that being said, we are mindful there is a general view that moving into 2017, there are negative headwinds in businesses. So, when you are looking at an asset today, you have to be cognisant of the fact that the existing shareholder might wish to exit for a specific reason. We are being cautious about that,” he added.
He admitted that the manufacturing and education businesses are crowded, and not something the group is experienced in.
“We have the financial capability and a bit of management capability. But we are not industry experts, so that is what is on the mind of the board,” he added.
He said the group is looking for businesses that provide revenue stream and are priced correctly.
“We are actively evaluating a few opportunities, but I am unable to share them with you at this juncture,” he said, adding that the group is looking at acquiring four companies that are unrelated to the insurance business.
The group and Solidarity Group Holding BSC had proposed to sell MAA Takaful Bhd for RM525 million to Zurich Insurance Co Ltd.
MAA Group, which owns a 75% equity in the company, will record gross sale proceeds of RM393.75 million from the disposal, some of which the group intends to distribute as a special dividend of 35 sen per share. Its shareholders will vote for the proposed disposal on Tuesday.
The group has been listed as a PN17 company following the sale of its conventional insurance arm, Malaysian Assurance Alliance Bhd, which was its core business, on Sept 30, 2011. Before the sale of MAA Takaful, the group was bound by the Islamic Financial Services Act, under which its acquisition would be restricted to the financial services sector. It expects to be able to lift the PN17 status in 12 to 18 months after the group submits its regularisation plan to Bursa Malaysia on June 30.
The plan includes the acquisition of a new business in Malaysia and to increase its stakes in MAA General Assurance Philippines Inc to more than 51% equity in the company, from the existing 40%.
“We will make it our subsidiary. We want to exert our control in the company,” Muhamad Umar said.
Meanwhile, the group is uncertain whether it will increase its stake in Columbus Capital Pty Ltd, a company involved in the home mortgage business in Australia, to the 55% it had initially planned, from the existing 47.95%.
“The company has a low portfolio, approximately A$1.5 billion (RM4.54 billion). The business in Australia is a monoline business, [in other words] only doing home mortgages. I think it needs diversifying current streams to be something we want to take up more of,” Muhamad Umar added.
Muhamad Umar also noted that investment in the Australian-based Altec Chemical Ltd is pure investment and that the group will observe to decide whether to raise its investment or exit the business.
MAA Group has subscribed for AS$1 million worth of Altech shares, comprising 11.63 million shares at A$0.086 per share, via placement on June 9, which gave it a 6% stake in Altech.