Malaysia’s MIDF, Al Rajhi Bank merger hangs in balance

Kuala Lumpur, Malaysia. Photo: Pixabay

A planned merger of Malaysia’s financial services companies Malaysian Industrial Development Finance (MIDF) and Al Rajhi Banking and Investment Corp (Al Rajhi Malaysia) is in a state of limbo with the shareholders missing the June 27 deadline, reported The Edge.

The shareholders of the two companies have sent a request to Bank Negara Malaysia (BNM) seeking more time to further negotiate the merger plan, the report added, citing a source familiar with the matter. It is unknown whether the central bank will agree to a second extension.

In March 2019, BNM had granted three months’ additional time for the proposed merger of MIDF and Al Rajhi Malaysia.

Malaysia’s government-linked investment company Permodalan Nasional Bhd (PNB) is a shareholder in MIDF while Saudi Arabia-based Al Rajhi Bank owns Al Rajhi Malaysia.

Al Rajhi Bank is likely to stay on as a shareholder in the proposed merged entity while PNB would remain its largest shareholder, the report noted.

Al Rajhi Malaysia’s business operations include commercial banking, retail banking and wealth management, while MIDF operates in investment banking and research.

The merger plan, if it succeeds, would lead to a financial services entity with a combined asset value of MYR 14.09 billion.

While both the shareholders are said to be keen on a merger, they have not arrived at an agreement on the commercial terms and the valuation.

Besides, since MIDF does not operate as a fully Islamic financial institution, there would be a need to recheck which assets could be adjusted based on shariah compliance, the report added. After the completion of this merger process, MIDF is expected to become an Islamic bank.

PNB is being advised by JP Morgan while Al Rajhi Bank is advised by Singapore’s Hong Leong Investment Bank.