PETALING JAYA: With BIMB Holdings Bhd’s acquisition of the Dubai Financial Group’s (DFG) 30.5% stake in Bank Islam Malaysia Bhd said to be close to completion, BIMB is now looking to gain full ownership of its unlisted banking subsidiary.
Yesterday, BIMB said in a filing with the stock exchange that it had received Bank Negara’s consent to commence negotiations with Lembaga Tabung Haji (LTH) on the latter’s stake in Bank Islam. BIMB is proposing to buy LTH’s 18.5% interest in Bank Islam.
LTH is the ultimate holding company of both BIMB and Bank Islam. Apart from its direct interest in Bank Islam, the pilgrim fund also owns a 51.5% stake in BIMB.
BIMB, meanwhile, has a 51% interest in Bank Islam.
Together with the DFG portion, this would raise BIMB’s stake in Bank Islam to 81.5% and further full control of the bank if the proposed move to buy LTH’s stake goes through. BIMB said “negotiations are to be completed on or before Dec 31, 2013”. It added that the consent from Bank Negara should not be construed as an approval for the proposed acquisition.
An analyst said the proposed move was a positive one, as it would plug “minority leakage”.
Bank Islam is profitable and contributes slightly over 80% to BIMB’s bottom line, with the balance derived from Syarikat Takaful Malaysia Bhd, in which BIMB has a 65.2% stake.
For the first quarter ended March 31, 2013, Bank Islam achieved a profit before zakat and tax of RM150.3mil as compared to RM130.6mil in the previous corresponding period due to a higher fund-based income.
StarBiz had earlier reported that BIMB was on the verge of completing its purchase of DFG’s stake, with valuation and pricing parameters having been somewhat determined.
BIMB group managing director and chief executive officer Johan Abdullah was quoted as saying that discussions between both parties had resulted in DFG offering a price for the stake, which was counter-offered by BIMB.
According to sources, BIMB is believed to be currently working on the funding mechanism, weighing various options that may possibly include a rights issue.
Bank Negara has given the parties until June 30 to conclude negotiations, which is an extension from the initial March 31 deadline. Talks had earlier stalled due to pricing issues.
It is not known how much the 30.5% stake was valued at but banking sources reckon that it could be between 1.6 times and 1.8 times price-to-book value.
To recap, DFG had first bought into Bank Islam in October 2006 to facilitate the latter’s recapitalisation. However, it has since been looking to hive off its interest to pare down debts.
BIMB’s plans to transfer its listing status to Bank Islam in still in the pipeline – an attractive proposition, say analysts, as it would give investors direct exposure to a standalone Islamic bank as opposed to a holding company with a couple of businesses.
It would also give the bank an avenue to raise capital for expansion and to strengthen its Tier-1 capital to cater to the new Basel III framework.
Bank Islam managing director Datuk Seri Zukri Samat, in an interview with StarBizWeek in mid-March, was quoted as saying that “the listing of the bank was on the cards and is a medium-term group agenda that is likely to be implemented anytime until next year”.