Second bite for PNB in MIDF merger

PNB head of syariah management department Dr Ahmad Basri Ibrahim said it aspires to progress with more significant achievements through the continuous implementation of its initiatives to assist in encouraging stability and growth of the Islamic investment industry in Malaysia.

PETALING JAYA: Permodalan Nasional Bhd (PNB) has a new opportunity to monetise its investment in Malaysian Industrial Development Finance Bhd (MIDF) after its plan to merge the wholly owned lender with the local arm of the world’s largest Islamic bank was dashed back in 2020.

The aborted merger of PNB’s MIDF and Al Rajhi Banking and Investment Corp (M) Bhd would have resulted in combined assets of RM13.43bil and paved the way for MIDF to become a full-fledged bank.

The deal, however, collapsed due to disagreements over preferred syariah law implementation.

About one and a half years since that merger failed, PNB is now looking at disposing its entire stake in MIDF to realise its gains.

In a filing with Bursa Malaysia yesterday, Malaysia Building Society Bhd (MBSB) said Bank Negara has given the green light for PNB and MBSB to commence negotiations with regard to the acquisition of MIDF.

“On behalf of our board of directors, we are pleased to announce that Bank Negara had vide its letter dated April 6, stated that it has no objection for MBSB to enter into discussions with PNB to explore the possibility of undertaking an acquisition of the 100% shareholding in MIDF which is held by PNB,” it said.

The central bank’s approval is valid for a period of six months from the date of its letter.

It remains to be seen whether the negotiations between PNB and MBSB can be completed in the six-month period.

In the case of the MIDF-Al Rajhi Malaysia merger talks, Bank Negara had granted two extensions to both parties, adding up to nine months of negotiations.

It is noteworthy that MBSB is majority-owned by the Employees Provident Fund, which owns a 65.87% stake in the group.

MBSB, which used to be a non-bank lender, received the licence to become a full-fledged Islamic bank in 2018 following its merger with Asian Finance Bank Bhd (AFB).

MBSB acquired AFB in a RM644.95mil deal that was settled via cash and the issuance of new shares.

Following the merger, AFB undertook a rebranding exercise and on April 2, 2018, it changed its name to MBSB Bank Bhd.

Prior to its merger with AFB, MBSB had explored a merger with Bank Muamalat Malaysia Bhd to create the country’s largest standalone Islamic bank. However, the plan was aborted due to disagreements over valuation and control.

Currently, MBSB Bank is Malaysia’s second-largest standalone Islamic bank. As of end-2021, the bank’s total assets were valued at RM51.3bil.

In comparison, Malaysia’s largest standalone Islamic bank – Bank Islam – had total assets of RM80.1bil as of end-2021.