This article first appeared in The Edge Malaysia Weekly on January 16, 2023 - January 22, 2023
The major shareholder of Berjaya Corp Bhd (BCorp), Tan Sri Vincent Tan, has been disposing of his shares in the company since early December. On Dec 27, an announcement from BCorp offered an explanation as to why the tycoon was paring his stake in the group’s flagship company.
The company stated that it was contemplating and evaluating a potential acquisition of a company operating under the purview of Bank Negara Malaysia. Hence, Tan needs to pare down his effective stake in the company to less than 20%, which would allow BCorp to be in compliance with the Financial Services Act (FSA).
The company that BCorp is eyeing was later confirmed as MCIS Insurance Bhd. This follows a report by The Edge.
Under the FSA, an individual cannot hold more than 10% equity interest in a financial institution. So, assuming that BCorp takes up a 51% stake in MCIS, Tan’s effective stake would be down to 10% in the insurance company and his shareholding would be in compliance with the FSA.
But what’s surprising is that BCorp and MCIS have not signed a definitive agreement on a corporate exercise. That being the case, will Tan increase his stake in BCorp if the transaction does not happen?
As at Oct 3, 2022, Tan had a direct stake of 20.85% and an indirect stake of 13.39% in BCorp. Now, the stakes are down to 10.18% and 13.53% respectively.
The highly regulated financial services industry sees to it that the disclosures of mergers and acquisitions (M&A) are transparent. Any two parties wanting to undertake a corporate exercise need to seek Bank Negara Malaysia’s approval. And the companies concerned, if they are listed, usually make a disclosure to the stock exchange as it is a material development. Even after the central bank gives its approval, the companies are required to disclose the matter to the stock exchange.
Hence, in an M&A exercise involving companies under the purview of Bank Negara, every step along the way is transparent. There is limited room for speculation.
In BCorp’s case, one can only assume that it has Bank Negara’s approval to explore a deal with MCIS.
BCorp already has a 30% stake in general insurance outfit Berjaya Sompo Insurance Bhd. So, it probably sees complementary value in MCIS, which is a life insurer.
The deal makes sense. But will it happen?
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