Maybank and Nishat Group are pleased to announce the signing of agreements, whereby Maybank will acquire up to 20% of the ordinary shares in MCB Bank Limited (“MCB” or the “Bank”) from Nishat Group. The acquisition is in-line with Maybank’s strategy, as Malaysia’s financial services leader in the region, to build its presence in key growth markets across the region. It also paves the way for MCB, one of Pakistan’s premier financial services groups, to engage Maybank as its exclusive foreign commercial bank strategic partner.
Maybank will initially acquire from Nishat Group 94,241,527 ordinary shares in MCB, representing a 15% stake in the Bank, for a cash price of PKR470 per share. The total consideration to be paid will be approximately MYR2.17 billion (US$686 million). The purchase price represents a 11.4% premium to MCB’s closing share price of PKR 422 on May 2, 2008, and a premium of 12.9% to the average closing share price for MCB over the 30 trading days immediately preceding the date of this announcement.
Based on MCB’s December 31, 2007 audited book value, the purchase price represents an implied price to book value multiple of 5.13x, a price to 2007 earnings multiple of 18.0x and a price to 2008 earnings multiple of 15.2x. Maybank will have the right to increase its stake to 20% after one year.
MCB is Pakistan’s fourth largest bank by assets having an asset base of MYR20 billion (US$6.7 billion), and the largest by market capitalization having a market capitalization of MYR13 billion (US$4.1 billion). The Bank has a customer base of approximately 4 million and a nationwide distribution network of 1,026 branches, including 8 Islamic banking branches, and over 300 ATMs, in a market with a population of 160 million. In 2007, MCB reported a profit after tax of PKR16.4 billion (US$270 million) and generated a return on average equity of 38% and a net interest margin of 8.08%. The Bank’s asset quality is strong with a gross NPL ratio of 4.7% and provision coverage of 100%.
The stake in MCB will allow Maybank the right to appoint two Directors to represent its interest on the Board of MCB. One of these Directors will be appointed immediately and the second Director will be appointed upon completion of the term of the existing Board, scheduled to be on March 27, 2009. The acquisition, when completed, is expected to be immediately accretive to Maybank’s earnings and should further enhance underlying return on equity.
Maybank Chairman Tan Sri Mohamed Basir Ahmad said, “This acquisition, like our recent announcement on BII, will align Maybank with a highly attractive franchise in a high growth and under-penetrated banking market with a large population. MCB enjoys a leading position in the Pakistan financial sector where it has proven its performance and profitability through consistently high returns on equity and strong net interest margins supported by a low cost funding base.”
Maybank President and Chief Executive Officer Dato’ Sri Abdul Wahid Omar added, “MCB is well-regarded for its established nationwide distribution platform, more innovative products and respected foreign-trained management team. We are excited about MCB’s further growth potential with Maybank alongside as exclusive foreign commercial bank strategic partner.”
As part of the transaction, Maybank and MCB will also enter into a business cooperation arrangement which will include, among others, Islamic banking, retail banking, credit cards, asset management and SME banking. Leveraging Maybank’s leadership and experience in these segments coupled with MCB’s brand and broad distribution network, Maybank and MCB believe that significant revenue synergies can be attained. Both Maybank and MCB are also expected to benefit from increased business ties and trade flows between Pakistan and Malaysia.
Chairman of Nishat Group and MCB, Mian Mohammad Mansha, said, “We are extremely delighted to have Maybank, the largest bank and financial group in Malaysia, as our strategic partner in MCB. We are confident that the experience and technical services that Maybank will be able to provide to MCB will further strengthen the Bank as it moves forward to affirm its leading position in the Pakistan banking sector. In particular, we look forward to the expertise that Maybank will be able to provide in consumer and Islamic banking, two of the faster growing segments in the market.”
Commenting on the transaction, the President of MCB, Mr Atif Bajwa, said, “The business cooperation agreement with Maybank will further strengthen our position to capitalise on the growth opportunities in the Pakistan market. We will be able to expand the services we offer our customers and increase efficiencies across our organisation by sharing our partner’s technical expertise in product development and best business practices. We have identified multiple areas of knowledge transfer which will enhance our existing business strategy, particularly in consumer banking, SME banking and Islamic banking. We are excited by the opportunities that our partnership with Maybank opens up for MCB to diversify our earnings streams both domestically and internationally.”
The proposed acquisition is now conditional upon regulatory approvals, including approval from State Bank of Pakistan and Bank Negara Malaysia.
Aseambankers and JPMorgan have been appointed as advisors to the Maybank Group while Merrill Lynch has been appointed as advisor to Nishat Group for the transaction.
Maybank was incorporated on 31 May 1960 and commenced operations on 12 September 1960. On 17 February 1962, Maybank was listed on the then Kuala Lumpur Stock Exchange (now know as Bursa Malaysia) and is today one of the largest companies by market capitalization in Malaysia.
Maybank is the largest financial services group in Malaysia and the Group offers a comprehensive range of financial services and products ranging from commercial banking, investment banking, Islamic banking, offshore banking, leasing and hire purchase, insurance, factoring, trustee services, asset management, stock broking, nominee services, venture capital and Internet banking.
The Group has over 450 offices in the 14 countries namely, Malaysia, Singapore, Philippines, Brunei Darussalam, Indonesia, Vietnam, Cambodia, Papua New Guinea, Hong Kong SAR, People’s Republic of China, Bahrain, Uzbekistan, Pakistan, Great Britain and United States of America.
Founded in 1948, Nishat Group is one of the leading and most diversified business groups in Pakistan. The group has strong presence in the most important business sectors of the country such as banking, textile, cement and insurance.
Mian Mohmmad Mansha is the Chairman of the group and has played instrumental role in its success. In recognition of Mr. Mansha’s contribution, the Government of Pakistan has conferred him with "Sitara-e-Imtiaz", one of the most prestigious civil awards of the country.
MCB Bank Limited
MCB is one of the leading banks of Pakistan incorporated in 1947. MCB was nationalized in 1974 along with all other private sector banks. MCB was privatized in 1991 when Nishat Group bought a majority stake in the bank. MCB’s shares are traded on all three exchanges of Pakistan and its global depositary receipts are listed on the London Stock Exchange.
During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base and managing its non-performing loans via improved risk management processes.