Highlight Affin seals RM1.36b deal

by **Cals** Thu 23 Jan 2014, 09:38

Highlight Affin seals RM1.36b deal

Business & Markets 2014

Written by Janice Melissa Thean of theedgemalaysia.com

Thursday, 23 January 2014 08:56

KUALA LUMPUR: Affin Holdings Bhd is set to become the country’s top brokerage house following its proposed acquisition of Hwang-DBS (M) Bhd’s investment banking, asset management and futures businesses for RM1.363 billion cash.

Affin, the country’s second smallest lender by assets, will pay RM1.088 billion for the entire interest in Hwang-DBS Investment Bank Bhd (Hwang IB), representing a price-to-book multiple of 1.28 times based on Hwang IB’s unaudited net assets of RM849.26 million as at Jan 31, 2013.

Affin will also purchase 70% of Hwang Investment Management Bhd (Hwang IM) and 49% of Asian Islamic Investment Management Sdn Bhd (AIIM) for a combined RM262 million. This is equivalent to 1.81% of both companies’ combined assets under management of RM20.86 billion as at end-Jan 2013.

The deal also includes Affin buying 100% of HDM Futures Sdn Bhd (HDM Futures) for RM13 million. Both Affin and Hwang-DBS signed a conditional share sale and purchase agreement (S&P) yesterday.

“We hope to be able to complete this acquisition [of Hwang-DBS’ key businesses] by April this year,” Affin Investment Bank Bhd (Affin IB) managing director Maimoonah Hussain told a press conference after the signing of the S&P.

The deal would propel Affin IB to be the country’s largest retail broker with a market share of 15.3%. Currently, its share of the local retail broking market stands at 3.3%. According to a note by TA Research in September last year, Affin IB is currently trailing Maybank Investment Bank Bhd (8.3%) and RHB Investment Bank Bhd (9.2%),

Affin said prior to the implementation of the proposed acquisition, Hwang-DBS will undertake an internal restructuring exercise by transferring its interests in HDM Futures and Hwang IM to Hwang IB. Only then will Affin acquire Hwang-DBS’s investment banking business to be merged with its own, Affin IB.

“We aim to complete the entire merger by September or October this year,” said Maimoonah.

To fund the acquisition, Affin has secured bridging loans of RM1.4 billion as well as use internal funds if needed. For the long-term funding plan, Affin will pursue a fund-raising exercise which includes a rights issue of new Affin shares which is expected to raise gross proceeds of up to RM1.25 billion.

“We are targeting to announce the rights issue in about two months, subject to shareholders’ approval,” said Maimoonah.

She gave an assurance that key management personnel of Hwang-DBS will be retained post-merger, and that the bank has no plans to offer a voluntary separation scheme in the first year.

The completion of the exercise will result in the group’s number of remisiers rising from 220 to 770. Affin will also have 25 branches across the country compared with six currently.

Maimoonah also said Affin is looking into new businesses to which its staff will be redeployed. Areas of growth it has identified are the equity capital markets, debt capital markets and wealth management space.

Affin is also looking forward to larger initial public offering (IPOs) jobs after the completion of the exercise.

“IPOs have become a real potential for us as Hwang-DBS is an extension of our advisory business,” said Maimoonah, adding that Affin will capitalise on Hwang-DBS’ reach in the small-medium enterprise spaces, namely Penang.

“Our capability to pursue much larger IPOs will be be strengthened by the acquisition.”

Affin edged out AMMB Holdings Bhd for the coveted Penang-based Hwang-DBS assets, which was founded by the late Datuk Seri Hwang Sing Lue. With Lembaga Tabung Angkatan Tentera as its largest shareholder, Affin is now working on the listing of Boustead Plantations Bhd this year.

This article first appeared in The Edge Financial Daily, on January 23, 2014.