Malaysia Building Society Bhd's head office, Wisma MBSB, at Jalan Dungun, Kuala Lumpur. (Pic taken by Hafidz for Star Online.)
KUALA LUMPUR: Malaysia Building Society Bhd
(MBSB) is acquiring Asian Finance Bank Bhd (AFB) for RM644.95mil through a combination of cash and new MBSB shares.
The non-bank lender, whose controlling shareholder is the Employees Provident Fund with a 65.56% stake, told Bursa Malaysia that the proposed merger would result in it becoming a full-fledged Islamic bank.
MBSB entered into a conditional share purchase agreement with the shareholders of AFB on Monday to buy the entire equity interest in AFB.
The shareholders are Qatar Islamic Bank (66.66%), Financial Assets Bahrain WLL (6.67%), RUSD Investment Bank Inc (16.67%) and Tadhamon International Islamic Bank (10%).
MBSB will pay RM396.89mil in cash and RM255.51mil via the issuance of 225.51 million new ordinary shares in MBSB at an issue price of RM1.10 each.
The cash option was based on a valuation of 1.2 times the agreed net assets (NA) of AFB of RM496.12mil as at Dec 31, 2016, while the shares option was based on a valuation of 1.5 times the accepted NA.
After the proposed merger, EPF’s share in MBSB will be slightly diluted to 63.16%, while Qatar’s second largest bank, Qatar Islamic Bank, will hold 0.73%, Labuan-based RUSD Investment Bank 1.83% and Yemen-based Tadhamon 1.1%
MBSB said the decision to grant the AFB vendors the option to elect either the cash option or shares option was arrived at after taking into consideration, among others, MBSB’s capital structure and substantial shareholders’ shareholdings in MBSB.
The issue price for the consideration shares of RM1.10 was commercially negotiated between MBSB and the vendors and represents a discount of about 6.78% to the five-day volume weighted average price of MBSB shares of about RM1.18 up to March 21, 2017, being the latest practicable date prior to the date of the letter of offer.
MBSB shares closed at RM1.11 last Friday. Trading of the company’s shares, suspended on Monday pending the merger announcement, will resume on Tuesday.
On completion of the proposed acquisition, MBSB will transfer all of its syariah-compliant assets and liabilities (A&L) to AFB in tranches, for a consideration to be determined later based on the book value of the A&L at the point of transfer.
All the residual conventional financial A&L which cannot be converted into Islamic A&L and non-core A&L of MBSB will be disposed to third parties.
MBSB’s A&L includes RM2.525bil nominal value of covered sukuk murabahah issued under a 15-year RM3.0bil nominal value structured covered sukuk commodity murabahah programme.
As a result of the proposed merger, MBSB is proposing to exchange the outstanding MBSB covered sukuk with new structured covered sukuk to be issued by AFB under a new structured covered sukuk programme to be set up by the unit.
On the rationale for the proposed merger, MBSB said it had conducted a thorough strategic analysis of the potential merits in combining the banking operations of the group with AFB.
“The merged entity is expected to leverage on the strength of MBSB’s business and the banking license held by AFB is anticipated to provide a unique opportunity for the merged entity to emerge as a full-fledged Islamic banking franchise in Malaysia,” it said.
MBSB said the proposed merger was expected to be completed by the first quarter of 2018.
The subsequent tranches of the proposed transfer of identified A&L and disposal of the residual A&L are expected to be completed within three years from the completion of the first tranche transfer.
AFB recorded a net profit of RM3.65mil for the financial year ended Dec 31, 2016.
As at March 31, AFB did not have any subsidiary or associated company.
However, AFB holds 50% equity interest in Safeena (L) Ltd, a jointly-controlled entity with AmanahRaya Investment Bank Ltd, which was incorporated in Labuan. It is mainly involved in the provision of funding for marine vessels.
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