CIMB Bhd is buying TA Enterprise Bhd's stockbroking business for around RM400mil.
Sources said a third party, which might be a foreign company that intended to own a stake in CIMB, would first acquire the stockbroking assets of TA Enterprise for cash. CIMB would then issue new shares to the institutional investor to take over TA Enterprise's securities business.
CIMB has a paid-up capital of 851.5 million shares of RM1 each. Its share price closed at RM5.05 yesterday, while TA Enterprise finished at RM1.14.
The stockbroking companies that TA Enterprise will sell are TA Securities, Botly Securities, Borneo Securities, and Kota Bahru Securities.
A source said the deal would give CIMB instant access to a large retail clientele, a much more profitable segment of the stockbroking industry compared with the institutional segment where profit margin had been squeezed.
CIMB chief executive Datuk Nazir Razak had earlier said the investment group was looking to grow its retail equities business by concentrating on high net worth individuals to supplement its strength in institutional business.
“We think some of our strengths can be synergised for the retail market,'' he said at a press conference last month.
CIMB also plans to offer bond options this year to meet the growing demand for hedging tools.
The stockbroking division currently contributes nearly 10% to CIMB's revenue and about 7% to its pre-tax profit. A large portion of its income is derived from merchant banking activities.
As for TA Enterprise, stockbroking generates more than half its revenue and pre-tax profit.
The group posted a net profit of RM61.4mil on a turnover of RM137.6mil for the nine months ended Oct 30, 2003.
TA Enterprise, a brand well known to retail investors, will exit the stockbroking industry after hiving off its securities business to concentrate on property development.
A source close to TA Enterprise said there would not be any major changes in the shareholding structure of the company even on completion of the deal.
Filings with the MSEB showed that TA Enterprise's substantial shareholder, Datuk Tiah Thee Kian, better known as Tony Tiah, had accumulated about 3.3 million of its shares on the open market in the past year.
Tiah currently owns 33.6% of TA Enterprise.
“TA Enterprise would not be involved in any businesses that need a licence to operate,'' the source said, adding that the cash received from the sale of its stockbroking business would come in handy for the expansion of the group's other core businesses.
The source said it was also possible the group would hive off its asset management and unit trust divisions.
“These businesses will not fit in well with TA's property development activities,” he said.
TA Enterprise's stockbroking arm has yet to be granted universal broker (UB) status although it has already complied with the requirements.
The group's wholly owned subsidiary, Botly Securities, had last July submitted a letter to the Securities Commission (SC) seeking modification and a waiver of several conditions imposed on its proposed acquisition of two stockbroking firms and its application for a UB status.
One of the conditions imposed by the SC is that Tiah and persons connected to him should reduce their shareholding in TA Enterprise collectively to not more than 20% before Botly Securities can start operations as a UB.
Sources said details of CIMB's deal with TA Enterprise would be announced tomorrow after the parties involved had finalised the terms and conditions.
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