Temasek completes investment deal with KL property group

Chan Tien Hin and Khoo Hsu Chuang, Bloomberg, Kuala Lumpur

Temasek Holdings Pte, the Singapore government's investment arm, said its venture with Langkah Bahagia Sdn. completed a 1.12 billion ringgit (US$295 million) investment in Malaysian Plantations Bhd., a banking and property group.

Closely held Vertical Theme Sdn., 49 percent-owned by Temasek, paid 2.70 ringgit a share and 1.49 ringgit for each warrant, for 30 percent of Malaysian Plantations, Temasek spokeswoman Rachel Lin said today in an e-mail. The move gives Temasek a 14.7 percent interest in Kuala Lumpur-based Malaysian Plantations. Langkah Bahagia, the largest shareholder in Malaysian Plantations, owns 51 percent of Vertical, Lin said.

"With Temasek as a substantial shareholder, Alliance Bank's funding costs should drop significantly," said Richard Cohen, senior vice president of institutional equity sales at CIMB Securities Sdn. in Kuala Lumpur. "Temasek is also probably the single biggest foreign investor coming into Malaysia over the next few years, and Alliance and its merchant banking subsidiary could see a lot of deal flow, helping its bottom line."

Temasek, the biggest shareholder in DBS Group Holdings Ltd., Singapore's biggest bank, has been trying for at least a year to add Malaysian banking interests to financial holdings that include stakes in PT Bank Danamon, PT Bank Internasional Indonesia and ICICI Bank Ltd. of India. Malaysian Plantations owns Alliance Bank Bhd., which offers banking, stock broking, asset management and corporate finance services, and has 75 branches nationwide.

Shares of Malaysian Plantations rose 10 sen, or 3.7 percent, to 2.79 ringgit at the 5 p.m. close of trading, its first gain in four days. They earlier rose as much as 4.5 percent, their biggest one-day percentage gain in two months. The stock has risen 12 percent this year, compared with the benchmark stock index's 0.9 percent decline.

Malaysian Plantations reported a 23 percent rise in profit to 202.15 million ringgit in its fiscal year ended March 2004. Profit has surged almost fourfold in three years.

"Temasek has an excellent record buying banks in Indonesia, and it's logical to expect they will repeat that in Malaysia," Cohen said. "I'm looking for world-class managers to be running the bank shortly."

Temasek and the Government of Singapore Investment Corp. are stepping up investments in Malaysia amid a rapprochement between the two countries, which were united in a federation from 1963 to 1965. Temasek took a 5 percent stake in Telekom Malaysia Bhd. last year, while GIC bought 5 percent of Proton Holdings Bhd., Malaysia's biggest carmaker.

"We are happy that the investment in Malaysian Plantations has been completed," said Mohd. Nasir Ali, a director of Langkah and the chairman of Malaysian Plantations in the statement. "We are pleased to enter into this joint investment with (Temasek), which is an investor and shareholder of many leading financial services companies in Asia."

On Monday, Langkah agreed to sell 15.37 percent in Malaysian Plantations to Vertical Theme. The move gave Temasek a direct stake of 7.5 percent in the banking and property group. Vertical bought more shares from the "open market," raising its stake to 30 percent, said Eva Ho, a Temasek spokeswoman.

The stake sale comes as Malaysia prepares to open its domestic banking industry to increased competition from foreign rivals in 2007. Currently, lenders such as HSBC Holdings Ltd. and Standard Chartered Plc account for about 26 percent of all bank assets in Malaysia, even though they operate under restrictions that include limits on the number of branches they can open.

Temasek, which has more than half of its S$90 billion ($55 billion) of assets in Singapore, is expanding overseas because it wants two-thirds of its investments to be in other Asian countries and members of the Organization for Economic Cooperation and Development (OECD).