M&A target?

  • Business
  • Saturday, 12 Nov 2016

FROM a corporate perspective, Alliance Bank Malaysia Bhd is often viewed as a merger and acquisition (M&A) target, largely because of its small size.

And recent changes in the shareholding structure at ALLIANCE FINANCIAL GROUP BHD (AFG) - the bank’s parent company - suggests that there could be M&A-related developments down the road for the bank.

Recall in April, three individuals, namely, corporate adviser Seow Lun Hoo, Singapore property tycoon Ong Beng Seng and one Ong Tiong Sin, who owns Singapore-based private equity firm RRJ Capital, had bought into Langkah Bahagia Sdn Bhd from Lutfiah Ismail, an associate of former finance minister Tun Daim Zainuddin.

Langkah Bahagia previously owned a 51% stake in Vertical Theme Sdn Bhd, the single largest shareholder in AFG with a 29.5% stake.

The remaining 49% stake in Vertical Theme is controlled by Duxton Investments Pte Ltd, which in turned is owned by Temasek Holdings Pte Ltd, Singapore’s sovereign wealth fund.

Notably, via Vertical Theme, Temasek effectively has a 14.2% indirect stake in the financial group and thought to have management control of AFG.

Meanwhile, the trio’s effective interest in AFG that has an asset size of RM54.47bil, now stands at 14.8%. The emergence of these individuals as owners of the 14.8% stake allowed the deal to be done without Bank Negara’s approval.

Under central bank’s regulations, a single individual is not allowed to hold more than 5% in one financial institution. Industry observers reckon that the three who are well-known in corporate circles are parties friendly to Temasek. . Beng Seng who owns the Four Seasons and Hilton hotels in Singapore, for example, has previously joined hands with Temasek to buy up properties in London.

Still, owning stakes in banks have become all the more challenging given that financial institutions are making frequent capital calls to boost their capital needs in order to meet international regulatory standards.

Could this mean that the three individuals could be divesting their shareholdings in AFG in the near future, possibly to an institution with stronger holding power?

Kornreich declined comment on this issue.

Recall, in 2012, Singapore’s DBS Bank had obtained Bank Negara’s approval to begin talks with Duxton for the sale of the latter’s 49% stake in Vertical Theme, but the deal fell through. AFG’s other substantial shareholder, meanwhile, is the Employees Provident Fund which has a 16.9% stake.

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