On Friday last week (November 24), ANZ announced that it would buy a 13.5% stake in MalaysiaÆs fifth largest bank provided it was able to increase this stake via a deal with Amcorp. That deal was reached late on Thursday (November 30) with the signing of a heads of agreement.
Securing the shares from Amcorp takes ANZÆs total stake in AMMB, which is the holding company for AmBank, to 24.9% for a total deal size of M$2.37 billion ($657 million).
The M$4.30 per share price paid to Amcorp is significantly higher than the M$3.05 paid late last week for the 13.5% stake, and takes the average purchase price for ANZÆs 24.9% interest to M$3.63 per share. That represents a premium of more than 16% on AMMBÆs closing price of M$3.22 on Monday. Amcorp itself has secured a 34% mark-up.
ANZ says the handsome price ôrecognises the dilution of AmcorpÆs controlling interest in AMMBö.
David Khoo, managing director at ABN AMRO, which acted as financial advisors to Amcorp, says the premium is within the range where control is typically involved for financial institutions transactions. ôLast weekÆs deal was a capital raising exercise at AMMB to give ANZ a toehold into the group. This weekÆs deal gives ANZ shared control of AMMB which recognises some control premium for its pricing, a common feature for transactions of this nature,ö he says.
Analysts following the deal in Australia are more cautious about the premium paid and calculate that the price represents a multiple of about 16 times estimated 2008 earnings. They say that the deal in Malaysia represents a distinct change in the bankÆs approach to its investments in Asia.
ôIf the deal progresses, ANZ will have more than 8% of shareholders funds invested in the region, compared to 2% a couple of months ago,ö says Citigroup analyst Craig Williams. ôANZÆs earlier investments have been in more blue-sky markets such as China or Indonesia, with longer-term growth profiles.ö
Williams says with ANZ now ramping up the proportion of capital invested in the region, investor scrutiny will increase. ôThe implication of this is that ANZ shareholders have a right to expect shorter-term returns on their investment than they might have in the past on smaller, more speculative plays in other Asian markets.ö
ANZÆs chief executive John McFarlane, who has spearheaded the bankÆs growth strategy in Asia, says the bank first began looking for investment opportunities in Malaysia seven years ago. ôInitial contact with AMMB began a couple of years ago, so we know the bank and management well and are delighted we have reached this stage.ö
Amcorp is the holding company of AMMBÆs chairman Tan Sri Azman Hashim. Hashim is a major shareholder in the bank and is under orders by MalaysiaÆs banking regulators to reduce his stake to less than 20% by May 2007. It was these orders that spurred AMMB into action to find a strategic partner.
In an interesting twist, ANZ beat off another bidder for the asset, private equity firm TPG Newbridge. This was the first time that a local Malaysian bank was allowed to negotiate with more than one party at a time following new rules introduced by the central bank last month. At present, foreign entities are allowed to take up to a 30% stake in a Malaysian bank.
The deal outlined in the heads of agreement signed yesterday is subject to due diligence and regulatory and shareholder approvals. ANZ expects to announce detailed terms of the deal in early 2007.
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