Public Bank chief executive officer and managing director Tan Sri Tay Ah Lek
Public Bank Bhd
(PBB) took an important step to align the future shareholding of the estate of the late Tan Sri Teh Hong Piow and also solidify its future with the acquisition of LPI Capital Bhd.
Public Bank chief executive officer and managing director Tan Sri Tay Ah Lek answers some questions posed by StarBiz on the moves made last week.
StarBiz: What does this mean for Public Bank to have its shareholding issue addressed by the restricted offer for sale (ROFS)?Tan Sri Tay Ah Lek: It actually means a lot to all of us at Public Bank group. Our late founder, Tan Sri Dr Teh Hong Piow, had always prioritised the employees’ welfare and believed that the success of the bank is to be shared by those who have helped built it.
Which is why the ROFS is carried out at a discount to all directors, employees and shareholders of the PBB group in accordance with the wishes of our late founder. I guess it’s his way of saying thank you to all parties.
Doesn’t this create a situation whereby there could be a possibility of these shares flooding the market?Quite to the contrary actually. Bearing in mind that this exercise is to be spread out over a period of five years, with no specific timing as to when the ROFS would be executed and to what extent the discount would be.
This is to ensure that the timing and quantum for the ROFS can be managed in a gradual and orderly manner, so as to not create a situation whereby the exercise could result in the share price of PBB being adversely affected.
Let me give you an example. Assuming the ROFS is distributed to all directors, employees and shareholders of the PBB group, this amounts to approximately 200,000 eligible recipients.
If the ROFS exercise is spread evenly over five years, say 475 million shares per annum, the quantum of shares to be received by each recipient each year is actually very manageable.
Even if they were to all dispose these shares in the market, which is highly unlikely, the trading liquidity of PBB shares will be more than able to absorb these shares.
Any hint as to the quantum of the discount to be offered under the ROFS?The trustees of the estate have yet to finalise the quantum of the discount but will definitely be guided by commonly accepted market-based principles when it comes to the pricing of these shares.
Will the confidence from Teh’s estate to current shareholders and also management translate to the continued structure that has brought success to the group?Yes, most definitely. With the Teh’s family continuous and unwavering support and stewardship of the PBB group, this formula which has served us so well in past will continue on in the future.
As the saying goes, “Don’t fix it if it isn’t broken”.
Why is Indochina an important expansion geographic for Public Bank?
We have a strong presence in Indochina via our operations in Cambodia, Vietnam and Laos with a total of 76 branches. We have, for example, been in Cambodia for over 32 years and believe that Public Bank is well-positioned to capture emerging business opportunities not only in Cambodia but the Indochina region at large.
Our Vietnam operations especially have been recording very encouraging growth in the past three years.
With a strong growth potential in the Indochina region, we see this region as offering us vast opportunities to expand and grow our banking business.
After buying the stockbroking business in Vietnam this year, what is next for the group in terms of filling the gaps of its business in Indochina?There is still a lot more opportunities for us to tap on to for our Indochina operations. The current product and service offerings are fairly straightforward and conventional, and we see opportunities for us to bundle our products and services especially when it comes to the small and medium enterprises and consumer markets, as well as the growth in demand for wealth management and capital market products and services.
With many banking groups selling their insurance business and going via the way of bancassurance, why did Public Bank feel differently by buying LPI?We strongly believe in our strategy which may differ from others. We see value in this strategic acquisition which complements our business model and we are confident we can extract a lot of value from directly owning a general insurance arm.
We are acquiring a meaningful controlling stake in a long and well established brand name, ready infrastructure, strong financial results and immediate client base that we would be able to build on.
Apart from the purchase of LPI being earnings accretive, how will Public Bank integrate that business in its organisation without stretching the cost aspect of the deal and extracting even more synergies going forward?
LPI is a well-run and efficiently managed company. It is, after all, listed on Bursa Malaysia and commands one of the best return on investments in the general insurance space.
While we will integrate some of the over lapping functions into the bank, we do not foresee the present structure and operations of LPI to change significantly.
I would also like to take this opportunity to assure all staff of the LPI group that there will be no retrenchment exercise to be undertaken following this acquisition.
We will, however, set up a steering committee to oversee the smooth transition and make any necessary changes if required.
LPI holds some 215 million PBB shares. If PBB holds LPI, these shares cannot be held by LPI and what will happen to that block? Will it be sold to the market or distributed as a dividend-in-specie?We will have 12 months from the date of completion of the proposed acquisition of LPI to address this matter.
It is still premature for us to make a decision on this matter but rest assured, we will explore all possibilities and make a decision at the appropriate time that will not be disruptive to the share price of Public Bank, whilst ensuring the interest of the shareholders of PBB and LPI is protected at all times.
Will Public Bank look at acquiring more insurance companies in Malaysia?We are fully focused and committed to this acquisition and see no immediate need for us to look elsewhere.
How is Public Bank maintaining the legacy left by its founder in its current operations and will that change going forward to account for the diversified shareholding structure?We are extremely loyal to the principles and the way we go about conducting our business and ourselves. It is who we are and it remains the fabric of our DNA, and therefore this exercise does not change one iota of how we will continue to uphold our late founder’s legacy.
Rest assured, the respected business culture coupled with the strong and disciplined work ethics, will continue to be the cornerstone of the bank.
The initial market response to your announcements has been fairly lukewarm as reflected in your share price. Why do you think this is the case?
I feel the initial market response is due to the fact that they may not have all the benefits of the full facts and information at their immediate disposal.
We have yet to issue our circular to shareholders for the LPI acquisition and have not finalised the quantum and distribution mechanism for the ROFS.
Let’s give the market time to digest these proposals first, as the structure of this ROFS is quite unique in the sense that it has never been done before previously.
We will soon be conducting various road shows and engagements with various stakeholders and I am fully confident that when the market analyses and fully understands these proposals, the reaction from them would be very positive.
