It is understood that Sarawak premier Tan Sri Abang Johari Tun Openg and a host of dignitaries from the state are already in Kuala Lumpur. “They had come in anticipation of the S&P (agreement) signing, but will now be doing the MOU instead,” one source said.

KUALA LUMPUR (July 19): A planned sale and purchase (S&P) agreement between Sarawak and Affin Bank Bhd’s (KL:AFFIN) biggest shareholder — the Armed Forces Fund Board (LTAT) — that would have formalised the state’s plan to increase its stake in the lender to around 30% from 4.8% currently, has been delayed, sources said.

The signing of the S&P agreement was meant to have taken place in Kuala Lumpur on Friday.

However, according to sources, the signing ceremony has been postponed as Sarawak looks to “clarify some conditions” that Bank Negara Malaysia (BNM) had attached to the deal.

Instead of the S&P agreement, a memorandum of understanding (MOU) will be inked between Sarawak and LTAT on Friday to explore strategic investments between the two parties.

It is understood that Sarawak premier Tan Sri Abang Johari Tun Openg and a host of dignitaries from the state are already in Kuala Lumpur. “They had come in anticipation of the S&P (agreement) signing, but will now be doing the MOU instead,” one source said.

On July 5, the premier had indicated to reporters in his state that there would be an official signing ceremony for Sarawak to acquire a major stake in “a bank” — widely understood to be Affin Bank — on July 19.

“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,” he said during an event in Kuching.

The Edge reported in its July 1 issue — citing sources — that BNM had recently granted conditional approval to Sarawak for the deal. It is not immediately known what these conditions are, but they are not expected to be a dealbreaker. The Edge understands that there are no issues with the state increasing its stake in Affin Bank to about 30%, a move that would make it the largest shareholder.

“Sarawak will have discussions with Bank Negara on the way forward. It’s still looking to close the deal,” one of the sources had said in the report.

That BNM’s approval comes with conditions suggests that the state may not have obtained everything it wanted out of the deal. “The issue could be that Bank Negara might allow the state to own the bank, but perhaps not control the bank. It would want to make sure there is separation of powers and see proper safeguards and governance put in place,” an industry source was reported as saying.

Currently, Affin Bank’s largest shareholder is LTAT with a 28.88% stake. It is understood that Sarawak is to acquire Boustead Holdings Bhd’s entire 20% stake in Affin Bank, as well as part of LTAT’s stake. Boustead, which is wholly-owned by LTAT, is currently the bank’s third-largest shareholder.

The bank’s second-largest shareholder is Hong Kong-based Bank of East Asia Ltd, which holds a 23.93% stake.

Affin Bank’s share price had shot up sharply over the last two weeks on expectations that Sarawak was close to formalising a deal with the major shareholder. It gained 20.2% over the period to peak at RM2.98 on Tuesday before closing lower on Thursday at RM2.97, which gave the company a market value of RM7.13 billion.