Al Rajhi no longer pursuing merger with MIDF

The Saudi Arabia-based bank stated that the termination in the negotiations is due to unmet agreements between the 2 parties


AL RAJHI Bank is no longer pursuing the merger plan between its wholly owned subsidiary, Al Rajhi Banking and Investment Corp (M) Bhd (Al Rajhi Malaysia) and Malaysian Industrial Development Finance Bhd (MIDF).

In a statement to the Saudi stock exchange, Tadawul, the Saudi Arabia-based bank stated that the termination in the negotiations was due to unmet agreements between the two parties.

“Al Rajhi Bank announces the latest developments regarding its previous announcement on Jan 13, 2019, on the negotiations to discuss the possibility of a merger between one of its wholly owned companies, Al Rajhi Malaysia, and MIDF.

“As no agreement was reached, it decided to end the negotiations and to not to proceed with the merger,” it said yesterday.

In January last year, Al Rajhi announced that it was in talks with MIDF for a merger possibility between the two parties after receiving preliminary approvals from the Saudi Arabian Monetary Authority and Bank Negara Malaysia (BNM).

It told Tadawul the merger was not expected to have any material impact on the bank’s financial statements and there were no related parties involved in the proposed merger.

BNM first gave the first nod for MIDF and Al Rajhi Malaysia to commence talks in January last year with extensions given, the latest was given on Sept 27, all of which had failed to lead to a deal.

According to a report by Focus Malaysia in February, both parties could not meet an agreement on Shariah banking rules to be applied as MIDF called for the Malaysian Shariah law for the merged entity, while Al Rajhi Malaysia wanted to follow the Saudi Arabian legislation.

In general, the Saudi Arabian Shariah banking laws are said to be more stringent compared to the local regulations, while the local laws allow for an extensive range of banking products to be introduced into the financial market.

As at March 31, 2020, Al Rajhi Malaysia had RM6.78 billion in assets and reported a net profit of RM1.16 million in its first quarter ended March 31, 2020 (1Q20), with revenue of RM93.55 million.

Its total net financing and advances stood at RM4.79 billion as at March 31, 2020.

Based on MIDF’s interim financial report for its 2Q20 ended June 30, 2020, the lender’s total assets stood at RM7.73 billion and had a total net financing and advances of RM548.3 million.

The lender made a revenue of RM91.9 million for the quarter and a net profit of RM12.38 million.

The wholly owned subsidiary of Permodalan Nasional Bhd is largely focusing on wholesale and investment banking, and Islamic capital-raising, besides small and medium enterprise financing.

Al Rajhi Malaysia is a retail bank. According to its website, it has a maiden branch which opened at Jalan Ampang, Kuala Lumpur, in 2006, and currently has 16 branches nationwide.

Consolidation in Malaysia’s financial institutions, which is typically sealed through mergers and acquisitions deals, has been a hit-and-miss.

Malaysia Building Society Bhd became a full-fledged Islamic bank after completing the RM645 million acquisition of Asian Finance Bank Bhd early in 2018, but the proposed merger between AMMB Holdings Bhd and RHB Bank Bhd reportedly fell through in 2017 on valuation issues.


Read our previous report here