1. INTRODUCTION
On 17 January 2013, we had announced the execution of an Implementation Agreement amongst CIG Berhad (“CIG”), Renggis Ventures Sdn Bhd (“RVSB”) (a wholly-owned subsidiary of Khazanah Nasional Berhad (“Khazanah”)), Aviva International Holdings Limited (“Aviva”) and Sun Life Assurance Company of Canada (“Sun Life”) in respect of the proposed disposal of CIG’s and its affiliate’s (collectively, the “Sellers”) respective stakes in the Companies to RVSB and the disposal of Aviva’s stake in the Companies to Sun Life (collectively, the "Transaction"). The application in relation to the Transaction was submitted to Bank Negara Malaysia (“BNM”) on the same day.
We wish to announce that CIMB has received BNM’s approval for the disposal of the Sellers’ stakes in the Companies to RVSB ("Proposed Disposal") on 28 March 2013.
Further to that, we also wish to announce that CIG has today entered into a conditional share sale and purchase agreement (“Conditional SSPA”) with RVSB in relation to the Proposed Disposal.
2. Information on CAAB and CATB
CAAB engages principally in the underwriting of life insurance and investment-linked business, and CATB in the underwriting of Family Takaful including investment-linked business and General Takaful business. Both Companies currently distribute their products through CIMB Bank Berhad’s (“CIMB Bank” or the “Bank”) network via a bancassurance arrangement, as well as other channels of distribution.
Prior to completion of the Transaction, the Companies are 51% indirectly owned by CIMB and 49% owned by Aviva.
3. DETAILS OF THE PROPOSED DISPOSAL
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| As at 29 March 2013: | |
| Principal activities | Investment holding |
| Issued and paid up capital | 2 ordinary shares of RM1.00 each |
| Directors | Hisham bin Zainal Mokhtar
Goh Keat Siang
Mohamed Rozani bin Mohamed Osman |
| Substantial shareholder | Avicennia Capital Sdn Bhd (wholly-owned subsidiary of Khazanah) – 100%
|
The issue price of the RVSB Shares is RM 43,529,412.00 in total, or RM 1.16 per share, representing approximately 4% of the Purchase Consideration, and shall rank pari passu to all ordinary shares of RVSB. CIMB currently has no intention to dispose of the RVSB Shares.
3.3 The Purchase Consideration was determined on a willing buyer-willing seller basis after taking into consideration, amongst others:
(a) Aggregate audited net assets of the Companies as at 31 December 2011 of RM 529.89 million and aggregate unaudited net assets as at 30 September 2012 of RM 597.60 million;
(b) Aggregate audited net profits of the Companies for the financial year ended 31 December 2011 of RM 35.37 million and aggregate unaudited net profits for the 9-month financial period ended 30 September 2012 of RM 73.72 million; and
(c) Future prospects of the Companies.
3.4 Other salient terms of the Conditional SSPA include the following:
(a) The Proposed Disposal is conditional upon the following conditions precedent being fulfilled or waived on or before a date falling no later than 4 months from the date of the Conditional SSPA:
(i) CIG having procured Aviva’s consent for the Proposed Disposal and waiver of any rights of pre-emption;
(ii) RVSB having obtained an exemption from the Securities Commission of Malaysia from having to make a mandatory take-over offer under the Malaysian Code on Take-overs and Mergers 2010 with respect to the remaining shares of the Companies; and
(iii) the disclosure letter in respect of the seller warranties of the Conditional SSPA being accepted by RVSB as containing no disclosure that reveals a material adverse change,
(collectively, the “Conditions”).
(b) Under the terms of the Conditional SSPA, it is intended that the Conditional SSPA and the agreement entered into between Aviva and Sun Life in relation to the sale and purchase of Aviva’s 49% stake to Sun Life are to be completed simultaneously.
The terms of the Proposed Disposal were agreed upon on 17 January 2013.
3.5 The liabilities of the Companies to be assumed by RVSB and Sun Life arising from the Transaction are set out in the Financial Information of the Companies in Appendix I.
3.6 The original cost of investment in the Companies is RM 260.67 million.
3.7 The cash proceeds from the Proposed Disposal shall be used for CIMB’s working capital purposes.
4. RATIONALE FOR THE PROPOSED DISPOSAL
The Proposed Disposal constitutes a divestment of CIMB’s non-core business in insurance manufacturing, which will enable CIMB to reduce its spread of activities and better focus on its strengths in bancassurance distribution, which remains a core component of its wealth management proposition.
The Proposed Disposal will also enable the reallocation of resources to grow its core businesses, and provides relief from future capital commitments to the Companies, minimising potential impact on CIMB’s capital ratios under the new Basel III regulations.
5. RISK FACTORS
The completion of the Proposed Disposal is subject to the Conditions as set out in Section 3.4 above being fulfilled or waived. There is no assurance that all of the Conditions can be fulfilled or waived under the Conditional SSPA within the time stipulated in Section 3.4(a). However, both CIG and RVSB (and to the extent that we are aware, Aviva and Sun Life) will continue to undertake all possible measures to ensure the satisfaction of these Conditions to ensure completion of the Proposed Disposal.
6. EFFECTS OF THE PROPOSED DISPOSAL
The proforma effects of the Proposed Disposal on CIMB’s share capital, consolidated net assets and earnings, substantial shareholders’ shareholdings in CIMB and dividend are as follows:
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6.1 Estimated gain on disposal
Assuming that the Proposed Disposal was completed on 31 December 2012, being the end of the financial year ended 31 December 2012, CIMB expects to realise an estimated gain on disposal of RM 515,095,000.00.
6.2 Earnings per share
The Proposed Disposal is expected to increase CIMB’s earnings per share. For illustration purposes, assuming the Proposed Disposal was completed on 31 December 2012, the proforma effects of the Proposed Disposal on the consolidated earnings of CIMB are as follows:
|
| Audited for FYE 31 December 2012 | After the Proposed
Disposal |
|
| RM 000 | RM 000 |
Profit attributable to equity holders of our Company
| 4,344,776 | 4,344,776 |
Estimated gain on disposal
| - | 515,095(1) |
Enlarged profit attributable to equity holders of our Company
| 4,344,776 | 4,859,871 |
|
| | |
Number of CIMB shares (000)
| 7,432,775 | 7,432,775 |
|
| 58.4 | 65.4 |
Note:
(1) Based on the carrying amount of the Companies as at 31 December 2012.
6.3 Net assets
The Proposed Disposal is expected to increase CIMB’s net assets (“NA”) per share. For illustration purposes, assuming the Proposed Disposal was completed on 31 December 2012, the proforma effects of the Proposed Disposal on the consolidated NA of CIMB are as follows:.
|
| Audited for FYE 31 December 2012 | After the Proposed
Disposal |
|
| RM 000 | RM 000 |
|
| 7,432,775 | 7,432,775 |
|
| 11,226,520 | 11,741,615(1) |
|
| 9,717,967 | 9,717,967 |
|
| | |
|
| (563) | (563) |
|
| (32) | (32) |
Equity attributable to equity holders of our Company
| 28,376,667 | 28,891,762 |
|
|
|
|
Number of CIMB shares (000)
| 7,432,775 | 7,432,775 |
|
| 3.82 | 3.89 |
Notes:
(1) Based on the carrying amount of the Companies as at 31 December 2012.
6.4 Share capital
The Proposed Disposal will not have any effect on the share capital of CIMB.
6.5 Substantial shareholders’ shareholding
The Proposed Disposal will not have any effect on substantial shareholders’ shareholding of CIMB.
7. MAJOR SHAREHOLDERS’ AND DIRECTORS’ INTERESTS
Other than as disclosed below, none of the major shareholders and/or directors of CIMB and/or persons connected to them have any interest, direct or indirect, in the Proposed Disposal.
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7.1 Major shareholders and/or persons connected to them
Khazanah is deemed interested in the Proposed Disposal by virtue of it being the direct major shareholder of CIMB (“Interested Major Shareholder”).
The Interested Major Shareholder’s direct and indirect shareholding in CIMB as at 28 February 2013 is as follows:
|
| ---------------Direct--------------- | -------------Indirect----------- |
|
| No. of CIMB Shares | % | No. of CIMB Shares | % |
|
|
|
|
|
|
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| 2,222,466,767 | 29.90 | - | - |
7.2 Directors and/or persons connected to them
Tan Sri Dato’ Md Nor Yusof is deemed interested in the Proposed Disposal by virtue of him being a nominee of Khazanah on CIMB’s Board (“Interested Director”).
Accordingly, the Interested Director has abstained and will continue to abstain from deliberating and voting on the Proposed Disposal at the relevant CIMB Board meetings.
The Interested Director’s direct and indirect shareholding in CIMB as at 28 February 2013 is as follows:
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| ----------------Direct---------------- | --------------Indirect------------ |
|
| No. of CIMB Shares | % | No. of CIMB Shares | % |
|
|
|
|
|
|
Tan Sri Dato’ Md Nor Yusof
| 400,000 | Less than 0.01 | - | - |
7.3 Other Transactions with the Related Party
There has been no related party transaction with Khazanah in the 12 months preceding the date of this announcement.
8. Percentage ratio APPLICABLE TO THE PROPOSED DISPOSAL
The highest percentage ratio applicable to the Proposed Disposal pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities is 3.78%, based on the latest audited financial statements of CIMB for the financial year ended 31 December 2012.
9. DIRECTORS’ STATEMENT
The Directors of CIMB (except for the Interested Director who has abstained from all deliberations on the Proposed Disposal), having considered all aspects of the Proposed Disposal, are of the opinion that the Proposed Disposal is in the best interest of CIMB.
10. AUDIT COMMITTEE’S STATEMENT
The Audit Committee of CIMB, having considered all aspects of the Proposed Disposal, is of the opinion that the Proposed Disposal is:
(i) in the best interest of CIMB;
(ii) fair, reasonable and on normal commercial terms; and
(iii) not detrimental to the interest of the minority shareholders,
on the basis that the valuation is in line with that of precedent transactions of similar nature.
11. APPROVALS REQUIRED
The Proposed Disposal is not subject to approval of the shareholders of CIMB or any other government authorities, save and except for the consent of BNM, which has been obtained on 28 March 2013.
12. ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances, the Proposed Disposal is expected to be completed in the 1st quarter of 2013.
13. DOCUMENTS FOR INSPECTION
The Conditional SSPA is available for inspection during normal business hours at CIMB’s registered office at 5th Floor Bangunan CIMB, Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, Malaysia, from Mondays to Fridays (except public holidays) for a period of 3 months from the date of this announcement.
This announcement is dated 29 March 2013.
cc: Securities Commission
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