Type	Announcement
Subject	Malayan Banking Berhad ("Maybank" or "the Company") Proposed Acquisition of the banking business of The Pacific Bank Berhad

Contents :

Pursuant to the Memorandum of Understanding signed on 17 September 1999, Aseambankers Malaysia Berhad ("Aseambankers") on behalf of Malayan Banking Berhad ("Maybank"), is pleased to announce that today Maybank has entered into a conditional sale and purchase agreement (the "Agreement") with The Pacific Bank Berhad ("Pacific") for the acquisition of the banking business carried on by Pacific (the "Proposed Transaction").

The board of directors of Maybank and Pacific, have approved the Proposed Transaction. Bank Negara Malaysia ("BNM") has confirmed that the Minister of Finance ("MOF") has allowed Maybank to sign the Agreement with Pacific, subject to the final approval from the MOF.

2. THE PROPOSED TRANSACTION

The Proposed Transaction involves an acquisition by Maybank from Pacific of the assets and liabilities of Pacific relating to the banking business including three (3) of Pacific’s wholly-owned subsidiary companies, namely P.B. Holdings Sdn Bhd, Pacific Nominees (Tempatan) Sdn Bhd and Pacific Nominees (Asing) Sdn Bhd (collectively referred as "Pacific Subsidiaries").


Assets and liabilities of Pacific not related to the banking business including certain subsidiaries and associated companies set out hereunder shall be excluded from the Proposed Transaction and shall remain with Pacific. The subsidiaries and associated companies which shall be excluded from the Proposed Transaction are:

(i) Pacific Insurance Berhad;
(ii) Pacific Mutual Fund Berhad;
(iii) P.B. Pacific Sdn Bhd;
(iv) Pacific Futures Sdn Bhd;
(v) Pac Lease Sdn Bhd; and
(vi) Malaysian Trustees Berhad.

The Consideration for the acquisition shall be a cash consideration of RM1,250 million subject to the following adjustments ("the Adjustments") upon completion:

(a) save and except for the dividend paid in July 2000 in respect of the financial year ended 31 December 1999, any dividends declared, paid or payable in respect of the period from 1 January 2000 by Pacific shall be reduced from the Consideration by the same amount; and

(b) additional cash consideration in an amount to be determined based on an agreed fixed value of approximately RM137,000 per day for the period from 1 January 2000 until the completion date reflecting incremental value of the banking business during the period shall be added to the Consideration.

The Consideration shall be paid by Maybank as follows:

(a) a deposit of RM30 million upon execution of the Agreement; and

(b) the balance is to be paid to a stakeholder on the completion date. Upon obtaining the relevant vesting order from the High Court of Malaya to give effect to the Proposed Transaction, remaining purchase consideration shall be released in full to Pacific.

Internally generated funds will be used by Maybank to finance the Proposed Transaction.

The Consideration was arrived at on a willing buyer-willing seller basis after taking into consideration, among others, the net asset value of Pacific as at 31 December 1999, the due diligence findings and future earnings potential of Pacific banking business.

While the net assets value of the relevant assets and liabilities to be acquired shall be determined upon completion, the indicative derived value of RM1,250 million (before the Adjustments) represent approximately 1.76 times the net assets value of the relevant assets and liabilities to be acquired which approximates RM709 million as at 31 December 1999.

3. CONDITION PRECEDENTS

The Agreement and completion of the Proposed Transaction is subject to and conditional upon, inter-alia, the followings being fulfilled:

(a) Approvals being obtained from:

i Minister Of Finance/Bank Negara Malaysia ("BNM");
ii Foreign Investment Committee (FIC);
iii Securities Commission (SC);
iv Kuala Lumpur Stock Exchange ("KLSE") (if required);

v shareholders of Maybank at an Extraordinary General Meeting to be convened for the Proposed Transaction (if required);
vi shareholders of Pacific at an Extraordinary General Meeting to be convened for the Proposed Transaction; and

vii any other relevant authorities, if required.

(b) all inter-company advances by Pacific to its subsidiaries or associated companies, other than the Pacific’s Subsidiaries, including such portion of advances to P.B. Pacific Sdn Bhd by Pacific in an amount of RM50 million to be included in the Proposed Transaction, shall be fully repaid or restructured into commercial loans; and

(c) satisfactory due diligence review that there are no material adverse conditions which would materially and adversely affect the net assets value of the assets and liabilities to be acquired by Maybank.

4. RATIONALE FOR THE PROPOSED TRANSACTION

The impending globalization and liberalization of the financial industry will continue to pose great challenges to Malaysian financial institutions. To attain its long term objective of a sound and resilient financial system, the government is encouraging financial institutions to rationalize and consolidate. Local financial institutions are currently undergoing various mergers and consolidation exercises to address these challenges ahead.

Following the completion of the Proposed Transaction, it is intended that the banking business of Pacific being acquired will be merged with that of Maybank. The merger exercise, will provide the combined entity with opportunities to synergise and to enhance its banking services. In addition, the combined entity will be able to benefit from economies of scale and synergies through cross selling of its products and services to an enlarged customer base. The Proposed Transaction and the contemplated merger are in tandem with Maybank’s strategy to further strengthen its position as the preeminent financial services group in Malaysia.

5. BACKGROUND INFORMATION

MAYBANK

Maybank was incorporated in Malaysia on 31 May 1960 with an authorized share capital of RM20 million and an issued and paid-up share capital of RM7.5 million initially. As at 30 June 1999, Maybank has an authorized share capital of RM4 billion and issued and paid-up share capital of RM2.309 billion, with a Group shareholders’ funds of RM9.217 billion and total assets exceeding RM117.479 billion.

Maybank is principally engaged in commercial banking business whilst its subsidiary companies are engaged in merchant banking, finance, leasing, hire-purchase, general and life insurance, discount house business, factoring, stockbroking, venture capital, trustee, nominee services, property trust, unit trust and futures broking.

PACIFIC

Pacific (formerly known as Batu Pahat Bank Ltd or “BPBL”) was incorporated in Johor in 1919. Subsequent to the takeover by the Oversea Chinese Banking Corporation in 1962, BPBL was renamed The Pacific Bank Berhad (“Pacific”). Pacific was listed on the Main Board of the KLSE on 23 August 1990. The Pacific Bank Group is principally engaged in the provision of wide range of financial services which include commercial banking, insurance, unit trust management, leasing, hire purchase, trustee and nominees services. Currently, Pacific has 69 commercial bank branches located throughout Malaysia.

6. FINANCIAL EFFECTS

6.1 Share Capital

The Proposed Transaction will not have any effect on the share capital of Maybank.

6.2 Earnings

The Proposed Transaction is expected to contribute positively to the future earnings of Maybank.

6.3 NTA

The Proposed Transaction is not expected to have any material effect on the NTA of Maybank.

7. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Insofar as the Directors of Maybank are aware, none of the Directors or substantial shareholders of Maybank or any person connected with them has any interest, direct or indirect, in the Proposed Transaction.

8. DIRECTORS’ OPINION

After due consideration of all aspect of the Proposed Transaction, the Board of Directors of Maybank is of the opinion that the Proposed Transaction is in the best interest of Maybank.

9. APPLICATION TO THE AUTHORITIES

Barring unforeseen circumstances, the application to the authorities SC, FIC, BNM (if required) will be made within three (3) months from the date of this announcement.

10. ADVISERS

Aseambankers Malaysia Berhad and J.P. Morgan act as financial advisers to Maybank.

11. DOCUMENTS FOR INSPECTION

The Agreement is available for inspection at its Registered Office, 14th Floor, Menara Maybank, 100, Jalan Tun Perak, 50050 Kuala Lumpur, during normal business hours from Monday to Friday (except for public holidays) for a period of three (3) months from the date of this announcement.

 

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