Tuesday October 9, 2012
BIMB gets Bank Negara nod to start talks on stake buy
By WONG WEI-SHEN
PETALING JAYA: Islamic financial services group BIMB Holdings Bhd has received consent from Bank Negara to start negotiations with Dubai Financial Group LLC (DFG) and Lembaga Tabung Haji (LTH) for its proposed acquisition of DFG's stake in Bank Islam Malaysia Bhd.
In a filing with Bursa Malaysia, BIMB said it had received a letter from Bank Negara on Oct 5 saying that the central bank “has no objection in principle” for the negotiations, which should be completed on or before March 31, 2013.
The consent for the start of negotiations of BIMB's proposed acquisition of DFG's 30.5% stake in Bank Islam “should not be construed as an approval for the proposal”, it said.
BIMB said all parties would have to obtain prior approval from the Minister of Finance, with Bank Negara's recommendation, as per the Islamic Banking Act 1983, before entering into any agreement.
BIMB already owns 51% of Bank Islam, while LTH holds the remaining 18.5%. It is notable that LTH is the largest shareholder of BIMB with a 51.8% stake, while the Employees Provident Fund holds a 9.53% stake.
If the proposed acquisition follows through, BIMB would see its stake in Bank Islam brought up to 81.5%, and therefore increasing LTH's stake in the latter indirectly.
In an earlier report by StarBiz, it was speculated that BIMB might be tempted to acquire the Bank Islam stake as Dubai Group faces legal proceedings over its US$10bil debt.
In September, the Royal Bank of Scotland, German lender Commerzbank and South Africa's Standard Bank said they were taking legal action against the Dubai Group in hopes of getting it to settle its borrowings.
Two years ago, the Dubai Group had opened negotiations with creditors to have its debt restructured. It owed US$6bil to international lenders and US$4bil in inter-company loans with parent company Dubai Holding.
The Dubai Group had already sold its stake in a Turkish insurance company to assist its debt woes. Analysts said more such sales were likely. They said BIMB might use a mix of cash and borrowings to fund the acquisition.
Analysts also opined that the deal might come at an expensive cost to BIMB as Bank Islam is “making good money”. “It all comes down to pricing,” an analyst said.
“Any intention for Dubai Group to dispose of its stake in BIMB is not new, considering its financial position,” CIMB Research had earlier said.
“We are positive if BIMB is able to acquire Dubai Group's 30.5% stake in Bank Islam, which is the biggest earnings contributor to BIMB. This will help reduce the leakages' of the earnings from Bank Islam to BIMB.”
Industry observers had said that the acquisition would enable BIMB to lock-in a higher share of profits from Bank Islam.
BIMB had said the acquisition would be subject to pricing and surety of value accretion. As one of the country's largest Islamic financing companies, Bank Islam had about RM33bil in assets as at June.
BIMB shares added 6 sen to RM3.14 at 5pm yesterday.