Sources said that only after the privatisation would private investors from the Middle East be invited to take a strategic stake in the insurer.
“The restructuring exercise will be undertaken at the subsidiary level first and may move on to the group level where the private investor will come in with new money,” a source said.
It is learnt that Takaful Malaysia would be privatised at between two and 2.5 times adjusted book value, which is on the high side of mergers and acquisitions involving insurance companies. “But then if the price is low, it would not attract enough acceptance,” the source said.
Sources said it was not surprising that Takaful Malaysia would be taken private as it was one of BIMB’s more valuable ventures. Takaful Malaysia was also an attractive privatisation target, given that it was trading below its net book value of RM1.95 as at March 31, 2008, a source said.
Its group managing director, Datuk Hassan Kamil, when contacted declined to comment on the privatisation exercise.
According to Bloomberg data, BIMB had a controlling 66.06% stake in the takaful operator as at September 2007, while its second largest shareholder was the Employees Provident Fund with a 4.5% stake. Most of the remaining shares were held by institutional funds.
Takaful Malaysia closed at RM1.82 yesterday, down three sen, with 437,200 shares changing hands.
Over the last week, Takaful Malaysia’s share price had been rising steadily to a high of RM1.96 on June 11, and had gained about 25% in just five days of trading. Its trading volume had also peaked to a year’s high of 1.86 million shares on June 11.
The takaful operator had been in the limelight since September last year when it expressed interest in seeking a partner to inject capital as it wanted to expand regionally.
In this respect, the company announced in October and November last year that it had received Bank Negara approval to commence negotiations with two parties — the Abu Dhabi-Kuwait-Malaysia Strategic Investment Corporation and Islamic Arab Insurance Co PJSC (Salama).
It was reported that the potential investors might acquire up to a 49% stake in Takaful Malaysia.
Sources said the two prospective investors could still come into the picture after Takaful Malaysia’s privatisation. However, it is not known if they would take up to 49% stake.
Takaful Malaysia has operations in Labuan through Asean Retakaful International (L) Ltd and in Indonesia via P.T. Syarikat Takaful Indonesia.
The Islamic insurer, which has more than 120 branches in Malaysia, is attractive to Middle East investors mainly because of its first-mover’s advantage in the local takaful business. Incorporated in 1984, Takaful Malaysia was the first takaful operator in the country and the first retakaful company in the world.
Its net profit for the third quarter ended March 31, 2008 climbed 62.8% to RM7.05 million from RM4.3 million a year earlier.
The insurer had declared an interim dividend of 3.5 sen per share, less 26% tax, for a total payout of RM4.13 million for its financial year ending June 30, 2008.
Takaful licences are valuable in Malaysia as Bank Negara had issued only eight licences, including four to local-foreign groups to establish Islamic insurance services in the country.
The foreign shareholdings in these joint ventures are capped at 49%. As of end-June 2007, the total assets of the takaful industry amounted to RM7.6 billion, representing 6.3% of the asset size of the larger insurance business in the country.
It is learnt that the central bank for the moment has no intention to grant new takaful licences, which gives those with a licence a better bargaining power. But for most of these players, the capacity to grow have been constrained by their capital.
The global takaful industry is expected to grow by 20% to reach US$10 billion to US$15 billion (RM33-49.5 billion) within the next decade, led by the Gulf Cooperation Council countries and Malaysia.
(The Star)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
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