Kuwait Finance House To Buy RHB Stake; Create World's Largest Islamic Bank.

A Middle East consortium led by Kuwait Finance House (KFH) is to gain control of a Malaysian bank under an agreement announced Wednesday as it attempts to buildthe world's largest Islamic bank.

Utama Banking Group (UBG), the single largest shareholder in debt-ridden Rashid Hussein Berhad, said it had agreed to sell its entire 33 percent stake to the consortium for 2.16 billion ringgit (US$617 million).

"After due deliberation, we are pleased to announce that the board has unanimously decided to accept KFH's offer on a conditional basis," UBG said in a statement to Malaysia's bourse.

Islamic banking group Kuwait Finance House, through its Malaysian subsidiary KFHMB, is leading the consortium which includes the Gulf Cooperation Council comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

The group said Tuesday it was prepared to pump in 12 billion ringgit to create the world's largest Islamic bank after purchasing UBG's stake.

Under the consortium's offer, UBG will be paid in cash as well as equity in a special purpose vehicle that will be formed to hold the acquired stake, UBG said. UBG will have an option to purchase up to 20 percent of the voting share capital in the vehicle at a price of up to 510 million ringgit, it said.

It also said the acceptance meant it had "decided to pursue negotiations with KFHMB on an exclusive basis", setting aside an offer from Hong Kong-based Primus Pacific Partners Ltd. UBG said in January it had been in talks with PPP for a proposed recapitalisation and restructuring of UBG's Stake in RHB.

"UBG shall discontinue negotiations with PPP with effect from today," it said. UBG, RHB and its lender, RHB Capital Wednesday announced the suspension of trade in their shares, with deals to resume Thursday.

Malaysia launched its Islamic financial sector in 1983 to provide products and services that comply with Sharia or Muslim religious laws banning the earning of interest. The country is aiming to become a global leader in Islamic finance, liberalising its Islamic financial system and promoting itself as a centre for Islamic finance education.

As part of the liberalisation, Islamic banking licenses have been issued to foreign players, while foreign firms are allowed to own up to 49 percent of equity in the Islamic banking and takaful industries. (Channel Newsasia)
Earlier related post: Islamic Finance To Flourish With Bank Negara's Help.
Image - Source