Thursday March 7, 2013

Affin deal progressing, Bank Muamalat acquisition to complete by month-end

PETALING JAYA: Affin Holdings Bhd's proposed acquisition of Bank Muamalat Malaysia Bhd is still progressing, with the former now awaiting response from DRB-Hicom Bhd, the major shareholder of Bank Muamalat.

According to analysts who attended a recent briefing by Affin, the banking group has already submitted its final proposal on the proposed acquisition, and is hoping to conclude its decision on the possible deal by the end of the month.

“Management (of Affin) does not foresee the need to extend the deadline further,” Alliance Research analyst Cheah King Yoong revealed in his report.

Bank Muamalat is jointly owned by diversified conglomerate DRB-Hicom, with a 70% stake, and national investment arm Khazanah Nasional Bhd, with a 30% stake.

To recap, Affin had in August last year said that it had obtained Bank Negara's approval to commence negotiations with DRB-Hicom and Khazanah for a possible acquisition of a 30% stake in Bank Muamalat. The negotiation was initially slated for completion by the end of December last year, until it was postponed to March 31 this year.

CIMB Research analyst Winson Ng said in his report that the deal, if successful, would enlarge Affin's branch network and give it the scale to compete with its larger peers.

“The plan is in line with Affin's aspirations to be one of the largest Islamic banking players, not only in Malaysia but also in the region. However, overlaps in operations would be unavoidable. Excluding any synergies, we estimate that the deal could be neutral for Affin's EPS (earnings per share),” he wrote.

Ng also noted that mergers and acquisitions (M&As) were still high on Affin's agenda to support its future growth.

However, he said, Affin was now less keen to purchase Bank Ina Perdana in Indonesia due to the 40% shareholding cap imposed by the Indonesian central bank.

“The cap would limit its control and restrict its plans to transform Bank Ina Perdana, making the deal less attractive, even though it would enable Affin to enter the fast-growing financial market in Indonesia,” he said.

Ng pointed out that it was encouraging to note that despite being one of the smallest banks in Malaysia, Affin was not discouraged from looking at M&As to strengthen its exposure to selected market segments.

“Furthermore, it is setting sights on overseas markets to expand its Islamic banking business. We think that Affin should put more priority on overseas M&As, especially in emerging markets like Indonesia and China, which would provide better growth prospects in the longer term and would not result in overlaps in operations, unlike domestic acquisitions,” he said.

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