Malaysia’s Khazanah holds off decision on Bank Muamalat stake

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Malaysian sovereign wealth fund Khazanah Nasional Berhad says it will hold off until the conclusion of the merger talk between Bank Muamalat Malaysia Berhad and Malaysia Building Society Berhad (MBSB) before deciding on its stake in the Islamic bank.

The comment was in response to local media asking if Khazanah was looking to sell its stake in Bank Muamalat, following the central bank’s approval for the Islamic bank to begin talks with MBSB last week.

Khazanah owns a 30 per cent stake in Bank Muamalat, an asset the state investment fund has always considered a non-core holding.

“We have a policy that if it is a non-core holding, we don’t really need to hold it. But we are not in a rush to sell either,” Khazanah managing director Azman Mokhtar told reporters on the sidelines of Khazanah’s Megatrends Forum 2015.

“It has to be at the right price, right configuration and so on,” he added.

The merger between Bank Muamalat and MBSB could create Malaysia’s biggest standalone Islamic bank.

Mokhtar said the negotiations for the potential merger would be held between MBSB and Bank Muamalat’s major shareholder, DRB-Hicom Berhad, which owns 70 per cent of Bank Muamalat.

“We have seen some progress in Bank Muamalat, but really, our partners DRB-Hicom and MBSB, which is owned by the Employees Provident Fund (EPF), are taking the lead,” Azman said.

“Khazanah will make a decision based on whatever they decide.”

If the merger comes through, the combined asset size of the two lenders is estimated to be MYR60 billion ($13.71 billion).

The assets combined is higher than BIMB Holdings Berhad’s asset size of MYR54 billion as at end-March. BIMB is the holding company of Bank Islam Malaysia Berhad, the maiden Islamic bank in the country established in 1983.

Bank Muamalat is the second Islamic bank set up in Malaysia, in 1991.

On Monday, The Malaysian Reserve cited a research analyst on the Bank Muamalat-MBSB deal, that MBSB may need to fork out MYR930 million to acquire the other.

The newspaper quoted RHB Research Institute analyst David Chong on the estimated cost, based on an assumption of price-to-book value ratio of 0.5 times and MBSB issuing 624 million new shares at MYR1.50 per share.

“This will result in an enlarged share base of 3.46 billion new shares from the present 2.84 billion MBSB shares,” Chong said, noting that EPF’s shareholding in MBSB is then expected to dwindle from 53 percent to 65 percent.

DRB-Hicom and Khazanah, each with 70 percent and 30 percent stake respectively, will see their equity interest decrease to 13 percent and 5 percent, respectively, post-merger.

The central bank required the merger negotiations to be finalised within three months from the date of the approval.

Late last year, MBSB had been part of a proposed three-way merger deal with CIMB Group Holdings Bhd and RHB Capital Bhd. The mega-merger was called off in January 2015.

Also read:

Malaysia: MBSB to commence merger talks with Bank Muamalat

MBSB to become full-fledged Islamic bank, via merger with Bank Muamalat

Malaysia’s MBSB looks at possible merger during next two years

CIMB-RHB-MBSB: mega merger aborted?

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.