Maybank hives off operations in Papua New Guinea for RM418m cash

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KUALA LUMPUR (May 18): Malayan Banking Bhd (Maybank) is exiting from Papua New Guinea (PNG) by hiving off its entire equity stake in Maybank (PNG) Ltd and Mayban Property (PNG) Ltd (MPPL) to Kina Ventures for RM418 million.

In a statement, Maybank’s president and chief executive officer Datuk Abdul Farid Alias said the decision to dispose its PNG operations was a result of strategic reviews carried out regularly to “reprioritise” its capital and resources, with the intention of focusing its growth agenda in target regions where it can achieve the best returns from its investments.

“The proposed disposal is undertaken as part of MBB’s continuous effort to evaluate its international operations, with a specific focus on maximising capital use, as well as optimising resources in the most efficient manner,” Abdul Farid added.

Maybank has entered into a share sale agreement with PNG-based stockbroking firm Kina Securities Ltd and Kina Ventures Ltd for the divestment of Maybank (PNG) Ltd (MPNG) and Mayban Property (PNG) Ltd (MPPL), according to the statement.

“While we have been operating profitably and successfully in PNG over the years, we had to evaluate how best we can use our capital, going forward, especially in light of new and more stringent requirements under the Basel III (global banking framework) regime.

"Ultimately, we believe we could achieve greater value creation for our stakeholders by re-focusing our resources in the ASEAN and Greater China regions, where we can realise greater synergies and achieve better returns on capital investment,” Abdul Farid said in a statement.

In a filing with Bursa Malaysia, Maybank (valuation: 1.45; fundamental: 1.5) stated the share sale agreement for the proposed disposal, expected to take place in the second half of 2015, was signed following the Central Bank of PNG’s approval on May 12.

The disposal involves the sale of the entire equity interest in MPNG and MPPNG respectively for a total cash consideration of approximately Kina 319 million (equivalent to approximately RM418 million based on the exchange rate of Kina 1 = RM1.31 as at 18 May 2015), plus the difference in the value of the net assets of MPNG as at the completion of the proposed disposal, compared to Dec 31, 2014.
 
The completion of the disposal will take place upon achieving IT and operational readiness, as prescribed in the share sale agreement.

MPNG, established in 1994, and MPPL, were incorporated in PNG, and were involved in commercial banking activities and property investment, respectively.

Both the companies which were serving the local community and cross-border clients for the past 20 years, will cease to be subsidiaries of MBB with effect from the completion of the proposed disposal.

Farid said despite this, Maybank would still be committed to serving customers in PNG, who have cross border requirements.

“Given our vast network in the region and in key international financial centres, we will still be able to provide PNG customers with access to markets and financial services around the world,” he added.

He also said the bank would ensure a smooth transition to the new shareholders, so that customers could enjoy uninterrupted services.

"We will work with Kina Ventures to ensure that the interest of customers and employees are taken care of, throughout the transition period.  

“We have developed a detailed transition plan, together with Kina Venture and the PNG Central Bank, to ensure smooth handover of operations and business continuity, post completion of the transaction,” he said.

Maybank maintained that the disposal will not have any effect on the issued and paid-up share capital and shareholdings of the substantial shareholders of the group.

The disposal is not expected to have any material effect on the earnings per share, net assets per share and gearing of the group for the financial year ending Dec 31, 2015.

“None of the directors and/or major shareholders of Maybank, and persons connected to them, have any interest, direct or indirect, in the proposed disposal,” Farid said.

Maybank share price gained four sen or 0.43% at RM9.36 today, for a market capitalisation of RM87.2 billion.

(Note: 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.)