Business

Saturday September 1, 2012

Affin gets support from HK shareholder for stake acquisition

By JOHN LOH
johnloh@thestar.com.my


PETALING JAYA: Affin Holdings Bhd has garnered the support of its Hong Kong-based shareholder Bank of East Asia Ltd (BEA) for the possible acquisition of a stake in Bank Muamalat Malaysia Bhd, banking sources said.

The Hong Kong Stock Exchange-listed BEA, in which tycoon Tan Sri Quek Leng Chan owns 15.09% through Guoco Group Ltd, holds a 23.52% block in Affin.

While discussions were still preliminary, the source told StarBizWeek that Affin was looking to strengthen its niche in Islamic banking via an interest in Bank Muamalat, one of the country's two standalone Islamic banks.

Affin, Malaysia's second-smallest lender, said last month it had received the nod from Bank Negara to begin negotiations with DRB-Hicom Bhd and Khazanah Nasional Bhd, which own 70% and 30% of Bank Muamalat respectively, for a potential stake sale.

The talks are to be completed on or before Dec 31.

Although details on pricing are not known at this juncture, an analyst pointed out that using Hong Leong Bank Bhd's merger with EON Capital Bhd as a benchmark, a sale could go through at 1.5 times price-to-book value.

Hong Leong Bank completed its RM5.06bil takeover of EON Capital in May last year, making it the fourth largest banking group here.

Affin had total assets of RM54.65bil as at end-June and Bank Muamalat RM20.5bil at end-March, according to RAM Ratings.

The Tan Sri Syed Mokhtar Al-Bukhary-controlled DRB-Hicom tried to pare down its holdings in Bank Muamalat last year to Bank Islam Malaysia Bhd and in 2010 to Bahrain-based Al Baraka, but both attempts fell through.

The central bank had allowed DRB-Hicom's acquisition of Bank Muamalat in Oct 2008 on the condition that it reduce its equity in the bank to 40%.

CIMB Research said in a note dated Aug 17 that a merger between Affin and Bank Muamalat would increase Affin Islamic Bank's asset size by 60% to make it the fifth-largest Islamic bank in Malaysia from 10th place currently.

“This, to a certain extent, would give the group the scale to compete with its larger peers like Maybank Islamic, CIMB Islamic, Bank Islam and Public Islamic Bank,” it said.

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