DRB-Hicom on divestment trail

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KUALA LUMPUR: DRB-Hicom Bhd seems to have reversed its acquisition trail as the diversified group sells its financial services assets after taking Proton Holdings Bhd private in addition to buying an equity interest in Pos Malaysia Bhd.

DRB-Hicom announced yesterday that Affin Bank Bhd had obtained Bank Negara Malaysia’s (BNM) approval to start negotiation to buy the group’s stake in Bank Muamalat Malaysia Bhd, in which it holds 70% equity interest.

In an announcement to Bursa Malaysia, DRB-Hicom said the potential disposal of interest in Bank Muamalat is in line with the condition imposed by BNM when it bought the 70% stake from Bukhary Capital Sdn Bhd, controlled by its major shareholder Tan Sri Syed Mokhtar Al-Bukhary, for RM1.069 billion in October 2008.

The condition required DRB-Hicom to reduce its stake in Bank Muamalat to 40%.

The announcement did not reveal the size of the stake in Bank Muamalat that DRB-Hicom intends to sell to Affin Bank.

Affin Bank’s parent, Affin Holdings Bhd, announced yesterday in a statement that the approval from BNM allows it to start talks with both DRB-Hicom and Khazanah Nasional Bhd for the possible acquisition.

Khazanah holds the remaining 30% stake in Bank Muamalat.

The negotiations are to be completed on or before Dec 31 this year, Affin Holdings said.

This is the second divestment plan that DRB-Hicom has made known so far this week.

On Wednesday, the group announced that BNM had granted its wholly-owned unit Gadek (M) Bhd to start preliminary talks with interested parties to sell its insurance assets.

Gadek’s 51% owned unit Uni.Asia Capital Sdn Bhd holds 68.1% equity interest in Uni.Asia General Insurance Bhd and 100% of Uni.Asia Life Assurance Bhd. United Overseas Bank (M) Bhd owns the remaining 49% in Uni.Asia Capital.

According to executives familiar with DRB-Hicom, the group’s divestments form part of its acquisition plan to take Proton  private some months ago to reduce its gearing.

Banks required DRB-Hicom to divest some non-core assets to pare down its borrowings when they granted the group credit facilities for the privatisation of Proton, the executives said.

DRB-Hicom extended a general offer at RM5.50 per share after it bought the 42.7% stake in Proton for RM1.29 billion cash from Khazanah.

The privatisation deal had cost DRB-Hicom about RM3 billion. Prior to that, the group paid RM622.8 million for a 32.21% stake in Pos Malaysia. As at March 31, DRB-Hicom’s total borrowings stood at RM5.36 billion, of which RM3.47 billion were long-term debts.

Bank Muamalat was valued at about 1.2 times book value based on its net assets of RM737.3 billion as at Dec 31, 2007. DRB-Hicom’s acquisition of the bank was settled via the issuance of 548.6 million shares in the diversified group.

For the fiscal year ended March 31, 2012, Bank Muamalat posted a lower net profit of RM85 million compared with its record high of RM133.6 million a year ago.

The bank’s gross financing grew 26% to a historical high of RM9.4 billion as at March 31. In terms of capital adequacy measures, the bank’s core capital ratio and risk weighted capital ratio stood at 14.4% and 19.7% respectively, sustained at a relatively high industry level.

 

This article is appeared in The Edge Financial Daily on 17 August, 2012.

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