KUALA LUMPUR: The estate of the late Tan Sri Teh Hong Piow and Consolidated Teh Holdings Sdn Bhd (ConTeh) have begun the discharge of their holdings in line with the Financial Services Act (FSA), beginning with the proposal to divest 175,896,000 ordinary shares, or approximately a 44.15% stake, in LPI Capital Bhd
to Public Bank Bhd.
Hong Piow founded both Public Bank and LPI and ConTeh remains his family’s private investment vehicle. He passed away in December 2022 at the age of 92.
Teh Li Shian Diona, the youngest daughter of Hong Piow, said at the press conference held here yesterday to announce the LPI deal that the estate and ConTeh also intend to further undertake a restricted offer for sale or ROS of shares in Public Bank progressively over a five-year period.
Public Bank is set to acquire the equity interest in LPI for a total cash consideration of RM1.72bil or RM9.80 a share. The lender’s managing director and chief executive officer (CEO) Tan Sri Tay Ah Lek said the deal had obtained the approval of both the Finance Ministry and Bank Negara on Aug 29.
In a filing with Bursa Malaysia, Public Bank stated the transaction will result in a proposed mandatory general offer (MGO) to acquire all the remaining LPI shares that it does not already hold should shareholder approval be secured at a later EGM.
Notably, however, the offer price of RM9.80 per LPI share for the proposed acquisition and MGO is 25% below its last traded price of RM13.
Responding to a question on this discrepancy, Diona explained that the estate holds a 23.4% stake in Public Bank – of which 22.8% is held via ConTeh – and the transaction is effectively the estate selling its LPI shares to itself, but ultimately allowing for the consolidation and streamlining of business between the two entities.LPI, through its full subsidiary Lonpac Insurance Bhd, is principally involved in the provision of general insurance coverage.
Public Bank CEO Tay said the proposed acquisition represents a strategic opportunity for the lender, the third largest in the country in terms of assets, to further expand its general insurance segment into the Malaysian market through LPI.
“This will allow the enlarged Public Bank group to establish an immediate market presence and strong foothold in the general insurance segment in Malaysia as a comprehensive complementary service to its current financial services and family takaful offerings,” he said.
In addition, he commented that the transaction is in tandem with the group’s plans to expand beyond just organic growth but through strategic acquisitions to expand its product and service offerings.
Tay said the strategy was evidenced by Public Bank’s recent completion of the acquisition of Public Bank Securities Vietnam Company Ltd, which allowed the lender to expand its financial services offering in Vietnam with the inclusion of securities trading services.
On this note, he acknowledged the group is open to further acquisition activities moving forward, provided they prove to be viable and are seen to add value to the group.
Having said that, he said Public Bank’s focus of expansion at present is in the Indo-China region, while smilingly side-stepping the question as to whether the lender would acquire another bank.
Tay said: “This strategic acquisition of LPI, a long-established and leading general insurance player in Malaysia, represents a clear and unique opportunity for us to accelerate our vision to move towards a Universal Banking Model that offers a comprehensive and diverse range of financial and other related products and services under the same group.”
Should the deal go through, he observed that LPI would then be able to leverage on Public Bank’s existing network of over 260 branches throughout Malaysia to expand its distribution channels and further grow its general insurance business.
On the flip side, the lender would also be able to tap into the sales and distribution network of LPI and further expand its reach to cover clients and customers of the insurer.
Public Bank intends to maintain the listing status of LPI on the Main Market of Bursa Malaysia. As at Sept 17, the issued share capital of LPI was RM398.4mil comprising 398.38 million LPI shares.
Lonpac currently operates 21 branches throughout Malaysia and one branch in Singapore.
LPI is also active in Cambodia through a 45%-owned associate company, with the remaining effective equity interest of 55% in Campu Lonpac Insurance Plc held by Public Bank.
Lonpac was founded by the late Hong Piow in 1962, four years before he established Public Bank in August 1966.
Meanwhile, the ROS will see the Teh family reducing its shareholdings in Public Bank to 10%.
For context, according to the FSA 2013, an individual can hold up to 5% in a bank, which may increase to 10% with approval from Bank Negara.
The limit of shareholding for institutional investors is capped at 20%, and anything more will again require approval from the central bank.
The late Hong Piow was allowed to hold 23.4% in Public Bank before his passing, which is way above the threshold of 10%, because of the “grandfather rule”.
Under the rule, those who already had an interest exceeding the threshold when the FSA came into effect in 2013 did not need to comply with it.
Exchange activity for Public Bank and LPI shares were temporarily halted for Wednesday and yesterday, with both entities releasing another filing with Bursa Malaysia to inform investors that trading has resumed today.
