DBS’ plan to buy Alliance Bank stake is said to have stalled

[SINGAPORE] DBS Group Holdings’ plan to buy a stake in Alliance Bank Malaysia has stalled as Singapore’s biggest bank has yet to get regulatory approval to commence talks, according to people with knowledge of the matter.

DBS and Alliance’s largest shareholder Vertical Theme submitted separate applications to Malaysia’s central bank about eight months ago but haven’t heard back from the regulator, said the people, asking not to be identified because the process is private. Local rules require them to seek approval to start discussions.

Bloomberg News reported in January that Vertical Theme – a Malaysian holding company backed by Singapore state investor Temasek Holdings – was considering selling its 29 per cent stake in Alliance Bank to DBS. 

If a deal goes through, DBS may want to raise its stake in Alliance to as much as 49 per cent via a voluntary partial general offer, the people said. Malaysia currently caps foreign ownership of commercial banks at 30 per cent, but there has recently been talk of the government relaxing the limit in some sectors, the people said.

A deal for the Alliance Bank stake is unlikely to proceed if DBS cannot get a green light to buy as much as 49 per cent of the Malaysian lender, one of the people said.

Considerations are ongoing and no final decisions have been made, the people said. Representatives for DBS and Vertical Theme’s backers declined to comment, while Alliance Bank said it had no knowledge on the matter.

Bank Negara Malaysia, the country’s central bank, said it doesn’t comment publicly on specific applications on acquisition or disposal of interest in shares of its regulated entities as a matter of policy.

Applications concerning the shareholding of licensed banks, including those submitted by foreign entities, are assessed in accordance with the relevant provisions under the Financial Services Act 2013 and the Islamic Financial Services Act 2013, Bank Negara Malaysia said in a statement in response to queries from Bloomberg News.

A transaction for Alliance would give DBS a wider footprint in Malaysia, where Singaporean rivals Oversea-Chinese Banking Corp and United Overseas Bank already have an established presence. DBS is South-east Asia’s largest bank by total assets.

Temasek owns 49 per cent of Vertical Theme via Duxton Investment & Development, while the remainder is held by RRJ Capital founder Richard Ong, hotelier Ong Beng Seng and corporate adviser Seow Lun Hoo through Langkah Bahagia. Temasek is also DBS’ biggest shareholder with a 28.3 per cent stake in the company.

Alliance Bank’s shares have fallen 4.8 per cent this year, roughly in line with the performance of Kuala Lumpur’s main stock benchmark index. The Malaysian lender has a market capitalisation of about US$1.8 billion. BLOOMBERG