Hwang-DBS and AFG in possible merger exercise


  • Business
  • Wednesday, 23 Nov 2011

PETALING JAYA: The market is rife with talk that Hwang-DBS (Malaysia) Bhd and Alliance Financial Group Bhd (AFG) are looking at a merger exercise.

A key player in the talks is said to be Singapore banking giant DBS Group Holdings Ltd.

DBS Bank owns 28% of investment bank Hwang-DBS and it has been long rumoured that DBS might also secure a controlling stake in AFG by buying over Temasek Holdings' indirect 29% stake in AFG.

“A local bank aiming to merge with another local bank definitely looks better than a foreign bank buying up a local outfit. It can smoothen the discussion process,” said an industry observer.

It is also possible that Hwang-DBS and AFG are in talks to merge some of their units, rather than a full-scale merger of the two financial institutions.

Hwang-DBS has a total equity of RM890mil while AFG has about four times that, at close to RM3.4bil.

Hwang-DBS declined comment, while AFG said: “We do not comment on market speculation.”

Shares in AFG have climbed 15% in the past six months.

Singapore investment firm Temasek has a 49% stake in Vertical Theme Sdn Bhd, the holding company that owns 29% in AFG.

It has been widely reported that Temasek might be planning to consolidate its banking assets under one umbrella, which is its 28%-owned DBS. DBS has long expressed its intention to become a leading pan-Asian bank.

It has also been reported that Temasek might hive off its stake in AFG to DBS to pave the way for the latter's entry into the Malaysian market.

Industry sources also said that Temasek could be close to finalising its acquisition of the other 51% in Vertical Theme, which is held by Langkah Bahagia Sdn Bhd, a company believed to be linked to former finance minister Tun Daim Zainuddin. The Employees Provident Fund (EPF) is the second largest shareholder in AFG with a 12% stake.

Temasek, as at press time, had yet to respond to StarBiz queries via email.

Temasek first came into AFG as a shareholder in 2005 after it acquired a controlling stake, together with Langkah Bahagia.

Sources said Langkah Bahagia's entry into AFG was at a low cost.

Hence, there should not be too much of haggling on pricing on its part.

Bank Negara's approval is needed for any discussion to first take place.

Shares in AFG have climbed 15% in the past six months.

Hwang-DBS started operations in Penang in the early 1970s and was one of the first stockbrokers to receive the Universal Broker status from the Securities Commission in 2001. It became a full-fledged investment bank in 2007.

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