After six months of negotiations, the two banks have reached a preliminary agreement for BEA to buy existing and new shares in Affin. BEA will pay the higher of 1.3 times of Affin's net tangible assets per share or the par value of each share. BEA currently owns 4.92% of Affin. The acquisition will be financed from its own funds.
Malaysia-based analysts estimate the deal to value Affin shares at M$2.59 ($0.75) each. ôThatÆs a reasonable price to pay û bear in mind that AffinÆs balance sheet needs some strengthening,ö says one Kuala Lumpur-based banker.
For the year ended December 31, 2006, Affin made a net profit of M$226.9 million on M$1.95 billion in revenue. Earnings per share stood at 18.48 sen.
The deal offers Affin ôexpertise and technical know-howö and will help it ômeet the challenges of a liberalised banking arena,ö Affin says in its statement to Bursa Malaysia. It is referring to the fact that since the Asian financial crisis, Malaysia has been trying to reduce the number of banks (currently at 54) to 10. There are plans to open the sector up to more foreign competition, as well.
BEA says in a statement to the Hong Kong Exchange that the deal is ôin line with the business strategy of the bank to grow its business organically through mergers and acquisitions. The bank intends to enter into other collaborative agreements with Affin to enable their co-operation in the development and operation of AffinÆs banking businessö.
The shareholders who will be approached include Malaysia's Armed Forces Superannuation Fund, which owns about 37% of Affin and property group Boustead Holdings, which owns 21% of Affin. The deal is subject to the approval of Affin's shareholders and regulators in Malaysia and Hong Kong.
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