MPHB to sell remaining 51% stake in MPI Generali for more than RM508 million cash

KUALA LUMPUR (May 18): KUALA LUMPUR (May 18): MPHB Capital Bhd has sealed the deal with Italian insurer Generali Asia to dispose of its remaining 51% stake in MPI Generali Insurans Bhd for an initial price of RM485 million cash, which is adjustable subject to the completion date.

The announcement came after the Ministry of Finance last Monday (May 9) granted MPHB the approval to sell the 51% stake. It confirms a report entitled 'MPHB Cap poised to exit insurance business' published in The Edge Weekly on May 16.

After the disposal, MPHB will cease to consolidate any earnings from MPI Generali. Its future earnings will be derived from its remaining businesses which comprise the credit services and property business.

The filing with Bursa Malaysia stated that MPHB’s wholly-owned unit Multi-Purpose Capital Holdings Bhd (MPCHB) has signed the share purchase agreement (SPA) with Generali Asia on Wednesday (May 18) for the latter to buy the stake.

Notably, under the SPA, the purchase price will be adjusted upward by RM4.63 million a month effective Jan 1, 2022 until the deal is completed within the “extended completion period”.

The extended completion period is defined as the six-month period commencing Jan 1, 2022 and expiring on June 30, 2022. It is subject to a further extension up till August 31.

MPHB targets to complete the divestment in the third quarter this year.

“As at May 11, 2022, being the latest practicable date (LPD) prior to the date of this announcement, the adjusted Purchase Price is RM508.16 million,” the announcement stated.

The announcement provides an example of the adjustment for purchase price, illustrating that if the disposal of shares was completed on May 11, 2022, the LPD, the adjusted purchase price will amount to RM508.16 million.

The completion of the stake sale is conditional upon the following conditions being fulfilled by the cut-off date (Aug 31):

(i) to obtain MPHB shareholders' approval at its EGM

(ii) MPI Generali to obtain BNM approval for the resignation of Kheoh And Yeng as a director of MPI Generali and the appointment of the nominee director of Generali Asia to the board of directors of MPI Generali based upon the nominee director provided by Generali Asia;

(iii) if not already obtained prior to the date hereof, the approval of Italian Insurance Supervisory Authority (IVASS) for Generali Asia to buy a 53% stake in AXA Affin General Insurance Bhd and a 70% stake in AXA AFFIN Life Insurance (AALI)

(iv) the closing of the AXA Transaction under the AXA SSAs;

(v) BNM approval having been obtained by AAGI and MPI Generali for the Business Integration (including approval to enter into the business transfer agreement) and for the issuance by AAGI of 36.17% of its enlarged share capital to Generali Asia; and

(vi) BNM approval having been obtained by Generali Asia to hold the Consideration Shares.

Based on an adjusted purchase price of RM508.16 million, MPHB expects to realise and record a gain on disposal of approximately RM170.46 million.

The adjusted purchase price of RM508.16 million represents a price-to-book multiple (PBR multiple) of approximately 1.49 times and 1.38 times based on the audited net assets (NA) as at December 31, 2020 and December 31, 2021 attributable to MPHB’s 51% interest in MPI Generali of RM342.15 million and RM367.86 million respectively, it said.

MPHB added that the PBR multiples for profitable listed insurance companies (with market capitalisation of RM500 million to RM2 billion) in the ASEAN region are in the range of 0.97 to 1.84 times.

“As at this juncture, the board is still deliberating on plans for the utilisation of the proceeds from the proposed disposal,” it said. The adjusted price of RM508.16 million is equivalent to 71 sen per share.

The share price of MPHB fell one sen to RM1.47, valuing the group at RM1.05 billion. The stock has gained nearly 15% year to date.