MBSB’s takeover of MIDF ‘fair, reasonable’

PETALING JAYA: Shareholders of Malaysia Building Society Bhd (MBSB) are recommended to approve the RM1.01bil takeover of Malaysian Industrial Development Finance Bhd (MIDF).

In an independent advice letter, Kenanga Investment Bank (IB) said the proposed acquisition of 100% equity interest in MIDF from Permodalan Nasional Bhd (PNB) is “fair, reasonable and not detrimental” to the interests of MBSB’s shareholders.

A resolution on the proposed acquisition will be tabled in an EGM to be held on July 27.

In exchange for the stake in MIDF, MBSB will pay PNB by issuing 1.05 billion new shares in the group at an issue price of 96.52 sen a share.

Upon completion, MIDF will become a wholly-owned subsidiary of MBSB.

The stake owned by MBSB’s single largest shareholder, the Employees Provident Fund, will reduce to 57.45% from 65.87%.

Meanwhile, PNB will hold a 12.78% stake in MBSB.

Kenanga IB noted the final purchase consideration of RM1.01bil is “fair”, premised on its relative valuation analysis and precedent transaction analysis.

The final purchase consideration represents a price-to-book ratio (PBR) of 0.85 times. It is within the range of traded PBRs of financial institutions or their holding companies listed in Malaysia at between 0.39 times and 1.47 times.

Kenanga IB also noted that the PBRs of previous acquisitions of financial institutions listed in the country over the last 15 years ranged from 0.93 times to 2.35 times.

In addition, the issue price of 96.52 sen is also considered “fair”.

The investment bank also opined that the rationale for the proposed acquisition is reasonable.

MBSB has said the takeover of MIDF would create a well-capitalised financial services group that can provide end-to-end banking services to service a wider customer base.

With the combined strength and expertise of both MBSB Bank and MIDF, the enlarged group will be able to expand into new and larger customer segments through tailored financing, structuring and advisory solutions to support the business needs and growth of consumer and corporate clients.

Kenanga IB, however, cautioned that the potential benefits arising from the proposed acquisition are subject to certain risk factors.

“In evaluating the proposed acquisition, shareholders of MBSB should carefully consider the said risk factors and their respective mitigating factors prior to voting on the resolution pertaining to the proposed acquisition at the forthcoming EGM of MBSB,” it said.