Affin Bank sells asset management arm to CVC Capital Partners for over RM2b, say sources

Affin Bank sells asset management arm to CVC Capital Partners for over RM2b, say sources
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KUALA LUMPUR (Jan 27): Affin Bank Bhd is said to have clinched a cash deal to sell its asset management arm, Affin Hwang Asset Management Bhd (Affin Hwang AM), the banking group’s crown jewel.

The price tag is believed to be in the range of RM2.3 billion to RM2.6 billion cash, according to sources.

Private equity fund CVC Capital Partners is among the interested parties wanting to take over Affin Hwang AM, whose asset under management has grown to RM81 billion as at end-2021. 

Affin Hwang Investment Bank Bhd, a unit of Affin Bank, holds 63% stake in Affin Hwang AM, while other shareholders include Nikko Asset Management International Ltd with 27% stake, and Datuk Teng Chee Wai holding 3.1% equity interest. The remaining 6.9% is held by 13 shareholders with stakes of between 0.3% and 1.15%.

To recap, in early 2014, Affin Bank (then Affin Holdings Bhd) acquired Hwang-DBS Investment Bank Bhd and the asset management and futures businesses of Hwang-DBS, for RM1.36 billion.

“From what we hear it [the sale of Affin Hwang AM] is a done deal,” one source said of the sale. Another source noted that the regulatory approvals have yet to be obtained, but other details have all been ironed out.

“It is only pending the regulatory approvals,” the second source said. The requisite regulatory approvals being talked about are from Bank Negara Malaysia, which has to give the green light for such an acquisition.      

The Edge contacted Affin Hwang AM’s managing director Teng, for comment, but he did not reply to phone messages sent to him. Teng is the founder of Affin Hwang AM and has built the company to be the fastest growing independent investment management house in Malaysia.

It is learnt that Teng will not sell his entire stake. He will retain a portion of his equity interest in the company.   

CVC Capital Partners declined to comment when contacted on the matter.  

For its financial year ended Dec 31, 2020 (FY20), Affin Hwang AM chalked up after tax profits of RM114.25 million compared with RM83.7 million in FY19. Its annual revenue was at RM537.66 million in FY20 versus RM396.8 million the year before.

The company declared dividend of RM77.78 million to its shareholders in FY20. Over the past five years, Affin Hwang AM has paid out RM197.78 million in dividends.

As at end-2020, Affin Hwang AM had total assets of RM944.78 million and total liabilities amounting to RM753.35 million. The company had retained earnings of RM269.4 million as at end-2020.

A price tag of RM2.5 billion would indicate valuations of almost 22 times earnings.

CVC Capital Partners, which was established in 1981, has US$122 billion (RM511.36 billion) of assets under management, US$165 billion of funds committed and a global network of 24 local offices — 15 across Europe and the Americas and nine in the Asia Pacific region. CVC Capital Partners’ private equity platform manages US$92 billion of assets.

For some time now there has been talk of Affin Hwang AM undergoing an initial public offering (IPO), making it the first asset management company to be listed on Bursa Malaysia. But this did not materialise. It is not known what has hindered the IPO plan. 

Again assuming a price tag of RM2.5 billion, Affin Bank is expected to receive roughly RM1.57 billion from the divestment. The cash proceeds will come in handy to help recapitalise the bank.

Affin Bank’s share price has climbed from RM1.65 on Dec 22 last year to a high of RM1.96 on Wednesday (Jan 26). It was trading at RM1.95 as at 4.45pm on Thursday (Jan 27), giving it a market capitalisation of RM4.14 billion.

The bank is currently valued at only 0.43 times of its book value of RM9.55 billion.

Lembaga Tabung Angkatan Tentera and its subsidiary Boustead Holdings Bhd have 34.81% and 20.85% stake respectively, in Affin Bank. Meanwhile, Bank of East Asia Ltd is the second largest shareholder with a 23.7% stake.

Kathy Fong