Affin Holdings buys Hwang-DBS IB assets for RM1.36b

KUALA LUMPUR (Jan 23, 2014): Affin Holdings Bhd will splurge RM1.36 billion in cash to buy most of Hwang-DBS (Malaysia) Bhd's investment banking assets, a deal that would create the country's second-largest brokerage by trading value.
Affin is acquiring 100% of Hwang-DBS Investment Bank Bhd, 70% of Hwang Investment Management Bhd, 49% of Asian Islamic Investment Management Sdn Bhd and 100% of HDM Futures Sdn Bhd.
The acquisition is expected to be completed by second quarter of 2014.The proposed acquisition comes following the death of Hwang-DBS founder Hwang Sing Lue on Dec 16, 2012.
Affin Investment Bank Bhd (Affin IB) managing director Maimoonah Hussain said the acquisition is expected to bring an additional RM80 million in pre-tax profit to the investment bank for the financial year 2015 and quadruple its distribution network to over 770 remisiers and 25 branches across Malaysia.
She said the merged entity would emerge as the top five asset manager in Malaysia based on assets under its management.
Affin has secured bridging loans of RM1.4 billion to fund the proposed acquisition.
It also plan to raise RM1.25 billion from corporate exercises that include a rights issue of new Affin shares to finance the acquisition.
The proposed rights issue will be subject to Affin shareholders' approval. The proceeds are for partial repayment of the bridging loans and capital injection into Affin Bank Bhd to fund future growth.
Maimoonah said senior management and key personnel of Hwang-DBS will be retained and no voluntary separation scheme will be undertaken for a year.
"There will be an overlap in support staff but Hwang-DBS is being acquired for growth. Affin has lots of plans to go forward in terms of investment banking business. We envisage that staff will be redeployed to many other areas that we want to grow," she said.
Affin IB expects the acquisition to strengthen its equity capital market (ECM), debt capital market and wealth management businesses.
Maimoonah said it has not been active in the ECM space due to lack of distribution capabilities.
"That's a big area that we want to capture and this (corporate) exercise will allow us to leverage on the distribution reach we now (will) have," she said at a media briefing here yesterday.
Maimoonah said the ECM platform, will enable it to strengthen its placement of shares business in particular institution placement. This will strengthen its capability to pursue large initial public offerings (IPO).
Other areas earmarked for expansion is the debt capital market space and wealth management. Affin's capacity in the debt capital market was previously constrained by its balance sheet and distribution reach.
"We expect to take advantage of the distribution reach that we have in the retail market, which Hwang IB brings to the table. In the long term, we want to convert the retail market to the online space, as we believe that's where the growth of retail market is going to be."
Maimoonah said Affin IB, which is the lead arranger for Boustead Plantations Bhd's IPO, sees IPOs as its real potential business.

"In the past, we've been doing a lot more advisory activities and that has been growing. In the last five years, we've increased our advisory activities in the equity space significantly. Now we have an expanded business with a reach into the SME business with HwangIB," she said.
Maimoonah said HwangIB has a strong base and reach in Penang which will bring significant value.
"Penang brings with it high, potential net worth and a lot of old money. With Hwang IB's remisier business, this could give us leads in the IB business," she said.