Dubai Group to sell Bank Islam stake

by JASON NG Dubai Group LLC, an investment firm of the Dubai ruler, is eyeing to sell its stakes in Bank Islam Malaysia Bhd at an indicative RM1 billion, marking the exit from its major investment in Malaysia.
It is learnt that the proposed divestment, which had been mooted even before the Dubai debt crisis last year, would be completed by June this year as the unidentified buyer is now near completion of its due diligence, according to sources close to the negotiation.
"The debt crisis in Dubai has, in some ways, put the sale on fast track," the source who declined to be identified due to the sensitivity to all negotiating parties told The Malaysian Reserve recently. Officials of both BIMB Holdings and Bank Islam could not be reached for comment at press time.
Dubai Group presently owns about 30.5% stake after it opt out of a preference shares issuance exercise of Bank Islam, a unit of BIMB Holdings Bhd, as plans for the proposed divestment was already in place then.
"There is a process running and we expect the sale to be done over the next few months," Rothschild Malaysia Sdn Bhd managing director/CEO Piers Willis said separately when contacted. Rothschild is the sole financial advisor to Dubai Group.
Back in 2006, Dubai Group had bought 40% of Bank Islam via its unit Dubai Investment Group LLC for RM828 million, edging out Bahrainbased investment bank Unicorn Investment Bank BSC and Oman’s largest financial services provider BankMuscat SAOG.
The proposed divestment is part of a ‘strategic review’ program by Dubai Group and is ‘irrespective’ of the debt crisis in Dubai, Willis said. He declined to comment further.
Bank Islam had suffered a RM1.3 billion loss after tax at the end of 2006 before turning around a year later with a RM232.46 million net profit.
Dubai, one of the sevenmember state under United Arab Emirates, and its investment arm Dubai World were under intense media spotlight since December 2009 after it sought a standstill on some US$22 billion (RM73.5 billion) of debts.
Fellow emirate Abu Dhabi had since come to the rescue with a US$10 billion bailout to help Dubai World pay off the debts while restructuring exercise that may include the sale of its asset worldwide is being carried out.

(This story appeared in The Malaysian Reserve on 4 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)