KUALA LUMPUR (June 9): Malaysia Building Society Bhd (MBSB) will acquire the entire equity interest in Malaysian Industrial Development Finance (MIDF) from Permodalan Nasional Bhd (PNB) via a RM1.01 billion share deal.
In a bourse filing on Friday (June 9), MBSB said the RM1.01 billion purchase consideration is to be satisfied via the issuance of 1.05 billion MBSB shares — which amount to 12.78% of its enlarged share base — to PNB at an issue price of 96.52 sen per share.
In turn, PNB will emerge as a substantial shareholder of the group, while EPF’s stake will be diluted to 57.45% from 65.87%.
The acquisition is subject to the requisite approval of MBSB shareholders, Securities Commission Malaysia and Bursa Securities. Kenanga Investment Bank Bhd has been appointed as the independent adviser for the deal, while AmInvestment Bank Bhd is the principal adviser.
MBSB said it expects the deal to be completed in the third quarter of 2023.
This confirms a report in The Edge Malaysia's May 8-14 edition, which cited industry sources as saying that EPF would emerge as the single-largest shareholder of the merged entity with a stake of “between 57% and 59%”, while PNB will hold “between 12% and 15%”.
On the RM1.01 billion price tag, MBSB said it represents 0.85 times the price-to-book ratio (PBR) of MIDF’s adjusted net assets as at end-December 2022, while the issue price of 96.52 sen apiece represents a PBR of 0.83 times MBSB’s adjusted net assets.
MBSB noted that this takes into account MIDF’s RM450 million cash dividend to PNB, as approved by Bank Negara Malaysia on March 31.
According to the group, the merged entity will be equipped with RM61.79 billion in assets as at end-December last year, further cementing MBSB as the second-largest standalone Islamic bank after Bank Islam Malaysia Bhd, which has assets of RM89.85 billion.
“The proposed acquisition will create an enlarged banking group with end-to-end banking services comprising consumer banking, commercial & SME banking, development finance, corporate banking, investment banking and asset management, servicing a wider customer base, that extends beyond MBSB and MIDF’s pool of existing customers,” MBSB said in a separate statement.
MBSB group chief executive officer Datuk Nor Azam M Taib said the potential synergies between the group and MIDF would enable the enlarged group to serve a wider group of customers through tailored financing, structuring and advisory solutions.
“Our combined strength and expertise puts us in a better position to support the business needs and growth of consumer and corporate clients,” Nor Azam said in a separate statement.
“The enlarged group would have an expanded network and complementary businesses which would strengthen its footprint in the banking sector with customer centricity as its core focus. This, in turn, would help the group build a more diversified and sustainable business, and profitable growth moving forward,” he added.
Moreover, Nor Azam said the group’s consumer banking, commercial & SME banking, development finance, and corporate banking business will help cushion the more volatile market for fee-based income, while the investment banking business will become more scalable with a larger capital base.
Back in 2019, a merger plan was mooted between MIDF and Al Rajhi Banking & Investment Corp (M) Bhd (Al Rajhi Malaysia), pursued by the latter’s parent Al Rajhi Bank. However, the proposal was binned in 2020 after parties involved failed to come to an agreement on whether to implement Malaysian or Saudi Shariah law on the merged entity, according to reports.
The MIDF-Al Rajhi proposal valued MIDF then at about one-time book value of RM1.7 billion, The Edge Malaysia reported in its Nov 4-10, 2019 edition, quoting sources.
Shares in MBSB closed one sen or 1.61% higher at 63 sen on Friday, giving the group a market capitalisation of RM4.48 billion.