Affin will own two capital markets and services licences following the proposed restructuring.
PETALING JAYA: Affin Holdings Bhd has announced the consolidation of its asset management business following the acquisition of Hwang-DBS Investment Bhd for RM1.36bil.
It said yesterday that its 100% equity interest in Affin Fund Management Bhd would be sold to Hwang Investment Management Bhd (Hwang IM) for RM55mil in an internal restructuring exercise.
The price represents a price-to-earnings of 5.6 times based on Affin Fund’s net profit of RM9.8mil for the financial year ended Dec 31, 2013 (FY13).
Affin has also proposed a restructuring of Hwang IB’s asset management businesses, which was broken into Hwang IM and Asian Islamic Investment Management (AIIM).
Hwang IM is a 70% subsidiary of Hwang Investment Bank (Hwang IB), which is in turn a wholly-owned subsidiary of Affin. NikkoAM Asia owns the remaining 30% in Hwang IM.
AIIM is a 49:51 joint venture between Hwang IM and NikkoAM.
After the proposed streamlining exercise, Hwang IB will own 70% in the enlarged investment management entity, which in turn, will own 100% in Affin Fund.
On the other hand, NikkoAM Asia will own 30% in the merged investment management entity.
This will further enlarge the assets under management (AUM) of Hwang IB, which is already one of the biggest assets management companies in the country.
Affin said in a filing with Bursa Malaysia: “The proposed fund merger will create a larger fund management company in terms of AUM with combined AUM size of RM27.3bil as at July 31, 2014.”
It intended to kick-start the regional expansion of funds for Affin’s asset management operations as the sourcing of AUM abroad is expected to increase due to branding and the regional visibility of the funds’ performance.
“It will also catalyse greater cross-selling between business units thereby providing Affin with the opportunity to establish a larger and more competitive asset management team,” it added.
The rationale of the exercise was to meet the Securities Commission’s requirements for one fund management licence to be surrendered following the acquisition of Hwang IB, the lender noted.
Following the restructuring, Affin will own two capital markets and services licences.
Affin Fund will be involved in fund management and dealing in unit trusts while Hwang IM will be involved in fund management, dealing in unit trusts and private retirement schemes.
“Save for the integration cost for the merger of the businesses of Affin Fund and Hwang IM pursuant to the proposed fund merger, which cannot be determined at this time, the board does not expect to incur any additional financial commitments as the businesses are operating on a going concern basis,” it said.
The merger of the fund management business is not expected to have any material financial effects on Affin Group’s net assets, gearing and earnings for FY14.
The streamlining activity is in conjunction with the merger of the two investment banks.