PETALING JAYA: CIMB Group Holdings Bhd has proposed to realise part of its investment in its fund management companies in a deal worth RM470.29mil.
In addition to monetising part of its investment in the joint venture (JV), which it has with Principal Financial Group Inc, a revaluation of its remaining stakes in the asset management business will see the second-largest banking group recognise a total gain of RM950mil.
The group announced yesterday that it had entered into sale and purchase agreements to divest a 20% stake in CIMB-Principal Asset Management Bhd (CPAM) to Principal International (Asia) Ltd (PIA) and a 10% stake in CIMB-Principal Islamic Asset Management Sdn Bhd (CPIAM) to Principal Financial Services Inc (PFI).
This deal is expected to be completed in the second quarter of this year.
“CIMB is expected to recognise a gain on disposal of about RM950mil and a Common Equity Tier 1 (CET1) ratio improvement of about 18 basis points upon completion of the proposed divestment,” it said in a filing with Bursa Malaysia.
The group’s CET1 ratio stood at 120% as of Sept 30, 2017.
Almost half of the RM950mil gain is derived from the proposed sale of the stakes, while the remaining is from the revaluation of its remaining stakes in the asset management companies.
At present, CIMB owns a 60% stake in CPAM, while PIA owns a 40% interest in the company that has RM50.26bil in assets under management. In CPIAM, CIMB has an equal stake of 50% as PFI at present.
Both PIA and PFI are subsidiaries of Principal.
The agreements for Principal to gain additional ownership of CPAM and CPIAM will be subject to relevant regulatory approvals.
“Once complete, Principal will increase its ownership stake to 60%, with CIMB retaining 40% ownership in the entities. The JVs will continue to be co-managed by both companies,” CIMB said in a joint statement with Principal.
“This transaction is expected to be completed in the second quarter of 2018. Principal will pay CIMB up to RM470.3mil for the additional ownership stake,” it added.
Upon completion of the proposed divestments, CPAM and CPIAM will no longer be CIMB’s subsidiaries.
The group said the proposed divestment is not expected to not have any effect on CIMB’s share capital and substantial shareholders’ shareholdings.
It is also not expected to have any material effect on CIMB’s consolidated gearing and net assets for the financial year ending Dec 31, 2018.
Meanwhile, CIMB group chief executive officer Tengku Datuk Seri Zafrul Aziz said the shareholding realignment is expected to boost the value proposition of the group’s JV with Principal.
“As a leading Asean universal bank, asset management continues to be an integral part of our regional banking business.
“This shareholding realignment will ensure that our asset management JV with Principal achieves its maximum potential and continues to be sustainably value-accretive to CIMB,” Tengku Zafrul said.
“Scale and extensive investment expertise are important to this business and we believe this strategic realignment will enhance the value proposition of the JV to enable us to serve our customers better,” he added.
Separately, Principal’s president of South-East Asia and India, Pedro Borda, said a higher stake in CPAM and CPIAM would enable the US-based financial investment management company to enhance its presence in the region.
“South-East Asia is a growing and important region for Principal, as we focus on bringing long-term savings and investing products to the market,” Borda said.
“By increasing our ownership stake in the CIMB-Principal JVs, we will be better able to bring our global asset management expertise and experience to bear while still leveraging the multi-channel distribution power of CIMB to continue to serve our customers,” he added.
CIMB shares gained one sen to close at RM6.75 yesterday.