$DRBHCOM (1619.MY)$ Citing sources, The Edge reported in Feb...

Citing sources, The Edge reported in February that DRB-Hicom had called banks and other financial institutions for a request for proposals geared towards a flotation exercise.

Over the years, many have wondered if Bank Muamalat would go down the M&A route, given that Bank Negara Malaysia requires DRB-Hicom to pare its stake in the bank to at least 40%. That was the condition set by the central bank when it allowed DRB-Hicom to acquire the 70% stake from Bukhary Capital Sdn Bhd — an entity also controlled by Syed Mokhtar — in a RM1.069 billion deal in November 2008.

It has been almost 16 years and the condition has yet to be fulfilled. Past attempts at M&A did not pan out, and the bank had in previous years told reporters that it may consider a listing as a pare-down option.

The bank’s 30% shareholder is sovereign wealth fund Khazanah Nasional Bhd, which is understood to be open to letting go of its stake as it is considered a non-core holding.

Nevertheless, analysts note that Bank Muamalat’s options to acquire or merge with other small to medium Islamic lenders are more limited now following Malaysian Industrial Development Finance Bhd’s merger with Malaysia Building Society Bhd last October. Among the standalone Islamic banks left are Kuwait Finance House (M) Bhd and Al Rajhi Banking & Investment Corp (M) Bhd.

DRB-Hicom’s banking business, via Bank Muamalat, accounted for 11.8% of the conglomerate’s RM4.33 billion revenue in the first quarter of this year. It was the group’s second-largest revenue contributor after its automotive business (70.3%).