Malaysia's Employees Provident Fund (EPF) and Abu Dhabi Commercial Bank (ADCB) have signed an agreement to finalise the sale of the pension fund's 25% stake in RHB Capital to ADCB.
Based on a purchase price of RM7.20 ($2.25) per share, the deal is valued at RM3.876 billion ($1.212 billion), making it the largest investment so far by a Middle East investor in Malaysia's financial sector. The deal is expected to pave the way for a strategic partnership between the EPF and ADCB and drive RHB Capital's goal of being among the top three financial service providers in the Asean region by 2020.
With this deal, ADCB will become the second largest shareholder in RHB Capital. The EPF is still the single largest shareholder, but will reduce its shareholding from the 82% stake it acquired after completion of a general offer for the banking group in July 2007 to 57%. Under a central bank ruling, the EPF needs to reduce its stake in RHB Capital to 35% by June this year, but the pension fund has sought permission to keep a 40% stake instead.
RHB Capital posted a net profit of RM712.9 million ($223 million) in 2007, with total assets of RM105.15 billion ($32.9 billion). It is the fourth largest fully integrated financial products and services group in Malaysia. It has more than 170 banking branches across the country serving 2.5 million customers as well as operations in Singapore, Thailand and Brunei.
The EPF is the national pension fund for the private sector in Malaysia; its total assets stood at RM316.5 billion ($99 billion) as of December 2007. ADCB is a full service bank; the government of Abu Dhabi, through Abu Dhabi Investment Council, holds 65% of the bank's capital.
The approval for this deal was given by Malaysia's Ministry of Finance through Bank Negara in February and the Foreign Investment Committee in March. The purchase process is expected to be completed soon.
EPF CEO Azlan Zainol, who is also a director of RHB Capital, says the strategic partnership with ADCB will allow the Malaysian bank to leverage on growing business flows between the Gulf Cooperation Council (GCC) and Asean. It will also strengthen both banks' strategic positions in the global Islamic banking market, he says.
ADCB CEO Eirvin Knox says the unique feature of the alliance between the two banks is the synergy covering operational, product and strategic areas. ôBoth institutions will benefit from opening of new markets and new products and structures that can be offered to customers,ö he says.
CIMB Investment Bank is the advisor for ADCB and Goldman Sachs is the financial advisor for EPF.
The United Arab Emirates (UAE) has a well-established trade relationship with Malaysia. Statistics show that UAE exports to Malaysia reached $938 million compared with imports of $2.3 billion in 2006. The UAE is considered to be the largest oil and oil derivatives exporter to Malaysia with a share of 4.76% of Malaysian oil imports.
During the 2000-2006 period, total Malaysian investments in the UAE totalled $119 million in various economic sectors such as financial services, insurance and real estate, where several Malaysian contracting companies are engaged in 22 landmark development projects, such as luxury hotels and residential villas and buildings in Jumierah Palm and Reem Island. Malaysian contracting companies also play an important role in the construction of the Dubai International Financial Centre with total investments of $668.7 million.