MBSB eyes trade finance, money market after AFB buy

KUALA LUMPUR (Nov 7): Malaysia Building Society Bhd (MBSB) is eyeing trade financing and money market opportunities now that it has inked a deal to acquire Asian Finance Bank (AFB) for RM644.95 million.

“We’re also trying to put in place more aggressive mortgage programmes, particularly for affordable housing,” said MBSB chief executive officer Datuk Seri Ahmad Zaini Othman at an analyst briefing yesterday.

Post-merger, MBSB will continue to be the listed entity while AFB — which will be rebranded — will be the subsidiary that runs the banking business. Ahmad Zaini said the broad plan is to have AFB take over the group’s listing status “two to three years down the road”.

The merged entity is expected to have a similar composition to MBSB’s current business, with 70% in retail banking and 30% in corporate banking.

Yesterday, MBSB announced it had signed a conditional share purchase agreement (SPA) with AFB’s shareholders that involves a cash option of RM396.89 million and a share issuance of RM225.51 million new ordinary shares.

The proposed issue price of RM1.10 apiece represents a one sen discount to MBSB’s closing price of RM1.11 last Friday, and will enlarge the non-bank lender’s share base by 225.51 million shares.

Of AFB’s four shareholders, Qatar Islamic Bank, which is the largest shareholder with a 66.66% stake, opted for both the cash and shares option. RUSD Investment Bank Inc (16.67%) and Tadhamon International Islamic Bank (10%) both agreed to take the shares option while Financial Assets Bahrain WLL (6.67%) opted for the cash option.

The cash consideration represents a valuation of 1.2 times of AFB’s net assets of RM496.12 million while the shares option represents a valuation of 1.5 times, giving AFB a blended price-to-book value of 1.3 times.

“I think the valuation is reasonable, not too pricey,” a banking analyst told The Edge Financial Daily.

The proposed issuance will dilute the shareholdings of MBSB’s largest shareholder, the Employees Provident Fund (EPF), to 63.16% from 65.56%. Second-largest shareholder Tan Sri Chua Ma Yu will see his holdings diluted to 8.45% from 8.78%.

On completion of the proposed acquisition, MBSB will transfer all its syariah-compliant assets and liabilities to AFB, for which AFB shares will issue new shares to MBSB, at an issue price to be fixed.

As a result of the proposed merger, MBSB plans to exchange its outstanding covered sukuk, which has a nominal value of RM2.53 billion, for a new structured covered sukuk to be issued by AFB, under a new sukuk programme to be set up by the latter.

The proposed merger is expected to complete in the first quarter of 2018, MBSB said.

The deal, which confirms an earlier report by The Edge Malaysia weekly in June, will make MBSB the second largest stand-alone Islamic bank with total assets of about RM44 billion. This is MBSB’s third attempt to acquire an Islamic banking unit in order to become a full-fledged Islamic bank.

Shares in MBSB, which were halted from trading yesterday to make way for the announcement, will resume trading today.

This article first appeared in The Edge Financial Daily, on Nov 7, 2017.

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