The extended timeline for Bank Negara Malaysia (BNM) to approve a “25% stake” acquisition in a licensed institution has raised eyebrows. The approval process, which has stretched over more than five months since January 2024, contrasts sharply with historical precedents. For instance, in 2007, BNM took only one month to greenlight ANZ's acquisition of a 25% stake in Ambank, allowing it to become a substantial strategic investor.

This discrepancy suggests that the proposed transaction may involve more complexity than initially reported. The media's portrayal of the acquisition as merely increasing the stake "to around 30%" seems to miss the mark. Instead, I still believe that the transaction will trigger a mandatory general offer to all shareholders, therefore necessitating a more protracted approval process from the regulator.

Sarawak’s Premier has frequently stated the state's intentions to take over three significant entities in 2024: Bintulu Port Authority, MASWings, and a commercial bank. As we know Sarawak did not take over control of Bintulu Port and MASWings with just 30% shareholding. On
5th July 2024, the Sarawak Premier said:

“The Sarawak government will take over an entity as the majority blockholder, which is related to stocks. However, I will not reveal further details today. Let’s wait until we get to the official signing ceremony, which is expected to take place on July 19…….We are going to be dominant player in the banking business in Malaysia” 

Historically, Australia and New Zealand Banking Group ANZ's 25% stake in Ambank did not translate into a dominant player in Malaysia's banking sector. ANZ has since divested its shares through bookbuilding. In the current landscape, Temasek Holdings and three individuals—Ong Beng Seng, Ong Tiong Sin, and Seow Lun Hoo—collectively hold a 29% stake in Alliance Bank, which presently has only ONE (1) non-independent director. I strongly believe Sarawak’s ambition is bigger than this. 

According to the news article of The Edge Malaysia dated 22 April 2024; Sarawak is reportedly seeking two board seats and the chairmanship at Affin Bank. Affin Bank, which currently has 11 board members, is governed by its Constitution that caps the number of directors at 12, unless otherwise decided by a general meeting. No other commercial bank in Malaysia has more than 11 directors. 

Presently, Affin Bank's board comprises three non-independent directors. Two of these non-independent directors are nominees of the Bank of East Asia (BEA), stemming from a 2007 agreement in which Affin committed to securing approval from BNM for the appointment of BEA's nominees. According to BNM's Corporate Governance policy, the board must maintain a majority of independent directors at all times. Therefore, Affin Bank is restricted to a maximum of five non-independent directors, assuming a clear interpretation of the term "majority" :) 

For Sarawak to secure its desired representation—two board seats and the chairmanship—it would need to reach an agreement with both BEA and the Lembaga Tabung Angkatan Tentera (LTAT). Given the implications for market dynamics and corporate governance constraints, it appears improbable that Affin Bank would accommodate five non-independent directors. Other commercial banks in Malaysia, including Public Bank, RHB Bank, and Hong Leong Bank, operate with three non-independent directors, at most. Larger banks like Maybank and CIMB despite their significant asset sizes compared to Affin Bank, have only one non-independent director.

Recent developments add further intrigue. The Bank of East Asia (BEA) recently disposed of 1.94 million shares in Affin Bank, a move that returned its shareholding to the pre-scrip dividend level of exactly 23.932%. This disposal is noteworthy because BEA has consistently subscribed to its full entitlement of company scrip dividends, never previously reducing its stake. I think this unusual move suggests alignment with a proposed transaction that has been submitted for regulatory approval. To me, it is another telltale sign that BEA is increasingly likely to be part of the persons acting in concert (PAC). 

I have invested and investigated Affin for a long time. I formulated a hypothesis, submitted it to tests and analysis, evaluated the actual developments with careful observation. So far, all the evidence reinforces my commitment, conviction and confidence in my hypothesis. 

I hope the "official signing ceremony" on 19 July, presumably signing of share sale agreement of controlling shares between Sarawak and persons acting in concert will adhere to fair market principles. A transaction should not include favorable conditions not available or extended to all shareholders. Ensuring equitable treatment for minority shareholders is essential for maintaining market integrity.

​

- A minority shareholder of Affin Bank since 2021.

Disclaimer : In the interest of full disclosure and transparency, I hold a vested interest in Affin Bank Berhad (ABB). The opinion and content above is based on my personal analysis and assessment, and it does not constitute investment advice and is NOT intended to encourage or promote the purchase of Affin Bank securities and derivatives. The opinion presented above is for informational purposes only.