Friday 24 May 2024
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This article first appeared in The Edge Malaysia Weekly on January 9, 2023 - January 15, 2023

MARKET talk is rife that Berjaya Corp Bhd (BCorp) could be eyeing a controlling stake in life insurance company MCIS Life Bhd, a subsidiary of South Africa-based Sanlam Ltd.

According to sources, BCorp has been negotiating with Sanlam since last year to buy the latter’s entire 51% stake in MCIS Life.

“Sanlam has been looking to exit MCIS Life for a while,” a source says.

In 2021, there was a news report about Sanlam’s plans to sell its 51% stake in MCIS Life for US$100 million and that it had hired an adviser for the exercise.

This came after Sanlam — one of the largest non-banking financial services groups in Africa — sold its life insurance and wealth management unit in the UK to focus on its core markets of Africa and India.

Sanlam first emerged in  MCIS in 2014, when it bought a 51% stake in MCIS Life (formerly known as MCIS Zurich Insurance Bhd) from Koperasi MCIS Bhd (KMB) and other shareholders for RM388 million, or RM7.58 per share.

Following the acquisition, Sanlam sold MCIS Zurich’s general insurance business because, under Malaysian law, a company is not allowed to operate in the industry under more than one licence.

BCorp has declined to comment whether the company plans to buy a stake in MCIS.

In response to queries from The Edge, its spokesperson says via email: “Announcements to Bursa Malaysia will be made in due course upon the signing of the definitive agreement with the seller of the licensed entity.”

BCorp’s plan to buy MCIS Life came about last month after the announcement that BCorp founder and major shareholder Tan Sri Vincent Tan Chee Yioun intended to pare his 26% stake to 19.6%.

Without disclosing the acquisition target, BCorp said Vincent’s stake reduction was to facilitate the potential acquisition of a 51% equity stake in a licensed financial services entity.

BCorp said it was in the midst of “evaluating a potential acquisition” involving a licensed entity governed by Bank Negara Malaysia under the Financial Services Act 2013 (FSA).

Apart from banks, other businesses governed by Bank Negara under the FSA include insurance broking, money-broking, financial advisory and digital banks.

“In view of this, [Vincent] has been carrying out several share disposals to reduce his stake in BCorp to not more than 19.6%, which will result in his effective interest in shares of the licensed entity [being] not more than 10% if the potential acquisition materialises,” the group said in a Dec 27 stock exchange filing.

“The board of BCorp proposes to expand and grow its financial services segment and expects the contribution from this potential acquisition to contribute significantly to the earnings and net assets of BCorp group.”

Under the FSA, individuals are allowed to own no more than a 10% stake in a financial institution.

“Vincent’s paring down of his stake in BCorp could indicate that the negotiation is at an advanced stage, owing to the [need to adhere to the] requirement,” a source says.

Besides Sanlam’s 51% stake in MCIS Life, KMB holds 44.39% equity interest and the remaining is held by individuals, according to MCIS Life’s filing with CTOS. No financial information was disclosed in the report.

According to a report by RAM Ratings in November 2021, MCIS Life has a market share of less than 3% in Malaysia.

“Since its rebranding in 2019, the insurer has pursued an aggressive growth agenda and charted above-industry new business growth (1H2021: 47% y-o-y; 2020: 14%; 2019: 39%), which has yielded some market share gains,” the rating agency said.

MCIS Life’s growth was driven mainly by its focus on products catering for the underserved and underinsured, such as the bottom 40% income group (B40) and the lower end of the middle 40% income group (M40).

As at press time, neither Sanlam nor MCIS Life had replied to queries from The Edge. According to Sanlam’s 2021 annual report, its equity in MCIS was valued at RM258.74 million.

BCorp is not new to the financial services business and is currently involved in the provision of insurance via its 30% stake in Berjaya Sompo Insurance Bhd. The remaining 70% stake is held by Sompo Holdings (Asia) Pte Ltd. BCorp also owns a stockbroking arm, Inter-Pacific Securities Sdn Bhd.

Last Friday, Vincent sold 40 million shares, or a 0.7% stake, in BCorp to his son-in-law S M Faliq S M Nasimuddin for RM10 million, or 25 sen per share. S M Faliq, who is deputy group executive chairman of Naza Group, is married to Vincent’s daughter Chryseis Tan Sheik Ling.

In the same filing with Bursa Malaysia, it shows that Chryseis, who is also BCorp’s non-executive director, acquired the shares in two tranches (34.52 million shares and 5.48 million shares) through her husband.

Subsequent to the divestment, Vincent is left with a 25.33% stake (direct and indirect) in BCorp.

Last month, BCorp saw the emergence of Kossan Rubber Industries Bhd founder and managing director Tan Sri Lim Kuang Sia as a substantial shareholder after he bought 400 million shares, or a 7.16% stake.

Having gained 22% in the past one year, BCorp’s shares closed at 30.5 sen last Friday, valuing the company at RM1.7 billion.

 

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