BIMB to buy out Bank Islam

PETALING JAYA (Aug 2, 2013): BIMB Holdings Bhd has proposed to take full control of Bank Islam Malaysia Bhd, in which which it already owns a 51% stake, by buying over the remaining 49% of the country's oldest and largest standalone Islamic bank from Dubai Financial Group LLC (DFG) and Lembaga Tabung Haji for US$884.6 million (RM2.813 billion).

BIMB will pay US$550 million (RM1.75 billion) for DFG's 30.5% stake comprising 690.196 million shares and US$334.6 million (RM1.06 billion) for the 18.53%, or 419.894 million shares, held by Lembaga Tabung Haji.

BIMB said it would pay up to RM2.96 billion for the 49% stake based on a maximum acceptable ringgit exchange rate of 3.35 against the US dollar.

The purchase consideration of RM2.81 billion (current scenario) and RM2.96 billion (maximum scenario) represents a price-to-book ratio of 1.85 times and 1.95 times respectively, based on Bank Islam's audited net assets of RM3.1 billion as at Dec 31, 2012.

BIMB also plans to raise RM3 billion from a rights issue with warrants as well as a sukuk sale to fund the acquisition.

In a filing with Bursa Malaysia yesterday, BIMB said the proposed fund raising will enable the group to raise the requisite equity and debt capital to fund the acquisitions.

"It will also enable BIMB to optimise its capital structure," it added.

Under the fundraising exercise, the group is proposing a renounceable rights issue of 426.71 million new shares with 426.71 million free warrants at RM3.60 per rights share to raise RM1.536 billion. The rights issue would be on the basis of two rights shares and two warrants for every five existing BIMB shares held.

BIMB also proposed to issue 10-year Islamic securities of up to RM2.2 billion in nominal value to raise between RM1.32 billion and RM1.47 billion.

The proposed acquisition and fundraising are expected to be completed by the fourth quarter of 2013.
Going forward, BIMB said the proposed acquisition is expected to contribute positively to its earnings with the inclusion of an additional 49% earnings contribution from Bank Islam.

Bank Islam Group recorded a profit before zakat of RM597.38 million for the financial year ended Dec 31, 2012 (FY12), a 21.3% increase from RM492.47 million in FY11, mainly due to financing growth and revenue from non-fund based income, as well as healthy asset quality.

"The net profit for FY12 has been the highest in 29-year Bank Islam's history," BIMB said.

"This can be partly attributed to a key component of the 'Sustainable Growth Plan', which was to reshape the Bank Islam's portfolio so as to create the right balance between the retail and non-retail business, secured and unsecured assets, and fixed and floating rate financing."

BIMB also reasoned that it wants to buy Bank Islam was because the latter had entered into a new phase in its corporate blueprint.

"Bank Islam has embarked on its new corporate plan for years 2013-2015 called Hijrah to Excellence with key focus on, among others, robust organic growth, service excellence and syariah-led innovation.

"With the new corporate plan, Bank Islam has set itself targets in various areas which include asset growth, financing growth and pretax profit growth as well as improved asset utilisation with a targeted financing/deposit ratio of 75% by 2015 (2012: 61.23%)," it said.

BIMB added that it intends to continue supporting the efforts of Bank Islam.

Shares of BIMB closed up 10 sen or 2.49% to RM4.12 following the announcement yesterday, with 533,900 shares traded.