PETALING JAYA: The long-awaited restructuring exercise of BIMB HOLDINGS BHD, which includes the transfer of its listing status to Bank Islam Malaysia Bhd by end-September 2020 and a RM800mil cash call, has been announced.
Bank Islam will be the fourth Malaysian bank since 2016 to assume the listing status of its parent BIMB, following in the footsteps of peers such as Alliance Bank Bhd, Affin Bank Bhd and RHB Bank Bhd.
Currently, Bank Islam is wholly owned by BIMB – the country’s eighth-largest banking group by market value.
Lembaga Tabung Haji (TH) is the controlling shareholder of BIMB with a 53.8% stake, followed by other top owners, namely, the Employees Provident Fund (12.5%), Permodalan Nasional Bhd (5.4%) and Skim Amanah Saham Bumiputera (21.5%).
In its filing with the stock exchange yesterday, BIMB announced that its proposed corporate restructuring would involve five components, allowing the group to “unlock significant value for shareholders”.
BIMB will place out new shares to raise RM800mil, which together with RM122.2mil internally-generated cash, will be utilised to fully settle its outstanding sukuk worth RM922.2mil held by TH.
“The proposed sukuk redemption is expected to result in finance cost savings of RM52.8mil per annum based on the effective profit rate of 6.25% per annum. The placement shares will be placed to investors to be identified at a later date. For illustrative purposes only, assuming a 5% discount to the five-day volume weighted average price (VWAP) of BIMB shares up to and including Nov 15 of RM4.30, the illustrative issue price would be RM4.09 per placement share.
“Based on the intended gross proceeds (RM800mil) and the illustrative issue price, the placement shares to be issued pursuant to the proposed placement are 195,599,022 BIMB shares, representing 11.1% of the issued share capital of BIMB, ” it said.
The second component of the banking group’s restructuring exercise is the scheme of arrangement (SOA) to settle BIMB’s outstanding warrants, which will be paid using internally-generated cash. BIMB will pay 26 sen per warrant, based on the five-day VWAP of the warrants up to and including Dec 10.
The SOA is expected to incur about RM110.9mil, but is subject to change according to the number of outstanding warrants as at the entitlement date.
Upon the completion of the private placement and SOA, BIMB will also undertake an internal reorganisation to dispose of its 100% stake in its leasing subsidiary, Syarikat Al-Ijarah Sdn Bhd, and stockbroking subsidiary, BIMB Securities (Holdings) Sdn Bhd to Bank Islam.
In addition, the entire 49% equity interest held by BIMB directly in BIMB Securities Sdn Bhd - a 51%-owned subsidiary of BIMB Securities Holdings - will be sold to Bank Islam.
All three transactions, which will be based on the latest audited net asset value (LNAV) of these subsidiaries, will be settled in cash by Bank Islam. As at end-2018, the total LNAV of the subsidiaries was RM115.15mil.
“The cash proceeds arising from the proposed disposals will be used by BIMB for settlement of the outstanding liabilities of BIMB and/or to defray estimated expenses relating to the proposals.
“Fewer layers in the corporate structure will help to enhance the supervision and efficiency of the new Bank Islam Group and facilitate the positioning of Bank Islam to become the frontrunner of the new banking group, ” stated BIMB in the stock exchange filing.
Following the above exercises, BIMB’s entire shareholding in Bank Islam and 59.5% stake in Syarikat Takaful Malaysia Keluarga Bhd (Takaful Malaysia) will be distributed by way of distribution-in-specie to the group’s shareholders.
Prior to the proposed distribution and capital repayment, BIMB will undergo a capital reduction and Bank Islam will undertake a share consolidation. This is to match BIMB’s outstanding shares so that the distribution of Bank Islam shares will be on a one-for-one basis.
For example, one consolidated Bank Islam share for every 1.28 existing Bank Islam shares.
Meanwhile, the basis of distribution and entitlement of Takaful Malaysia shares will be determined at a later date. In an example, BIMB said shareholders could receive one Takaful Malaysia share for every 3.99 BIMB shares.
“BIMB intends to cease its existing role as the financial holding company for both Bank Islam and Takaful Malaysia following the latest capital requirements imposed by Bank Negara for financial holding companies pursuant to the Capital Adequacy Framework for Islamic Banks that came into effect on Jan 1,2019, as well as the capital requirements under Basel III, ” the Islamic banking group said.
The transfer of the listing status from BIMB to Bank Islam will be carried out once the distribution-in-specie to shareholders is completed.
With this, BIMB said that Bank Islam will emerge as the one and only pure-play full-fledged Islamic financial institution to be listed in the region and enhance its corporate stature.
“Following the distribution and capital repayment, it is expected that the new group structure will be able to achieve potential earnings accretion through the elimination of, or minimisation of resources and infrastructure duplication, as well as reducing the complexity of group risk management, ” BIMB added.
The group’s proposed restructuring exercise is subject to approvals of several authorities, including Bank Negara, the Finance Ministry (on the recommendation of Bank Negara), the Securities Commission, Bursa Securities as well as shareholders of BIMB.
“Barring unforeseen circumstances, the proposals are expected to be completed in the third quarter of 2020, with the proposed placement and proposed distribution and capital repayment to be completed in the second and third quarters of 2020, respectively, ” BIMB said.
The idea of Bank Islam assuming BIMB’s listing status was bandied about for a long time, particularly since 2013 when BIMB bought the remaining 49% stake in the Islamic bank that it did not own.
Recall that Bank Islam was first listed on Bursa Malaysia in 1992 before BIMB was formed in 1997 to replace the bank as the holding company, thus becoming the group’s listing vehicle.
BIMB closed at RM4.28 yesterday, down by two sen or 0.47%. About 744,800 shares changed hands.
What do you think of this article?