A BACKDOOR listing may be in the offing for the Malaysian operations of Great Eastern Holdings Ltd if negotiations between GEL Capital (M) Bhd and PacificMas Bhd for the restructuring of their equity and insurance business operations are successful.
A spokesman for Great Eastern Life Assurance (M) Bhd told StarBiz that following approval by by Bank Negara, the parties could start negotiations but the matter was still at the preliminary stage.
Ultimately, Great Eastern Life Assurance will remain a subsidiary of the Great Eastern group through a new corporate entity. The brand name and financial strength of Great Eastern will also remain and our long-term commitment to the insurance operations in Malaysia stays unchanged, the spokesman added.
Shares of PacificMas Bhd hit limit up in the first session yesterday with an 81-sen jump to RM3.54. The counter, however, closed off its day's high at RM3.46 for a gain of 27%, on total volume of 1,182 lots.
According to a PacificMas filing with the KLSE last Friday, its proposed merger with GEL Capital would entail the injection of two wholly-owned units of Great Eastern Holdings Great Eastern Life Assurance (Malaysia) and its general insurance arm, Overseas Assurance Corp (M) Bhd into PacificMas, which would subsequently result in Great Eastern Holdings owning a 51% stake in the company.
Currently, Oversea-Chinese Banking Corp Ltd (OCBC) is a common substantial shareholder in both Great Eastern Holdings, which is listed on the Singapore Exchange, and PacificMas. OCBC owns a 48.92% stake in Great Eastern Holdings and 28.15% interest in PacificMas.
The restructuring exercise will also include the merger of the general insurance companies under the Great Eastern Holdings group, PacificMas and Koperasi Angkatan Tentera Malaysia Bhd.
In the announcement, PacificMas said it had also received approval from Bank Negara to start negotiations with Koperasi Angkatan Tentera to merge the insurance business of The Pacific Insurance Bhd, a wholly-owned unit of PacificMas, and Malaysia & Nippon Insurans Bhd.
Koperasi Angkatan Tentera is also a substantial shareholder of PacificMas with a 16.44% stake and owns 100% equity interest in Malaysia & Nippon Insurans.
Formerly known as Pacific Bank Bhd, PacificMas was initially left without a core business after the sale of its banking unit to Malayan Banking Bhd at end-2000 for RM1.25bil cash.
Once it decided to focus on insurance, PacificMas had been looking for small and medium-sized insurance companies, such as those with RM50mil to RM100mil annual gross premiums.
Last January, PacificMas completed the acquisition of Konsortium Insurans Bhd, a general insurance company for RM83.5mil cash.
An analyst from online financial portal Surf88 said the current development was positive as it would pave the way for PacificMas' entry into the life insurance segment but a lot would hinge on the terms which are yet to be disclosed.
Another analyst who declined to be named concurred with that view. It all boils down to the valuation issue. Although the deal is a definite plus for PacificMas, the valuation will be the determining factor, if the deal goes through, he said.
Analysts noted that Great Eastern had a strong branding as well as the position of being the largest life insurer in Malaysia. Great Eastern Life Assurance is also the oldest life insurer with a history of 95 years in Malaysia and book value assets of RM18bil.
Based on the balance sheet of PacificMas as of Sept 30, the company has assets of RM1.1bil, including a cash hoard of RM562mil.
Pacificmas' paid-up capital stands at RM171mil.
Interestingly, PacificMas is looking at investments in venture capital. It had entered into a shareholders' agreement to invest in Spring Hill Bioventures Sdn Bhd (formerly known as Formasi Bermutu Sdn Bhd).
Other shareholders of the agreement are Khazanah Nasional Bhd, Great Life Assurance (Malaysia) Bhd and Vertex Avenue Sdn Bhd. Spring Hill Bioventures was formed to raise US$30mil (RM114mil) for biotechnology ventures.
On the consolidation of the insurance industry, Mayban Securities expects the pace to pick up in the next 2 to 3 years, as the financial services industry is expected to be liberalised by 2007.
Although Bank Negara expects insurance companies to increase their paid-up capital to a minimum of RM100mil and consolidate, no deadline has been set.