CIMB Group Holdings Bhd is stepping up efforts to pursue a potential delisting of its Indonesian subsidiary, PT Bank CIMB Niaga Tbk, and plans to engage regulators on the exercise, according to CIMB Investment Bank Bhd (CIMB IB). The group has not yet announced a final decision on CIMB Niaga's listing status.
CIMB IB said the move is underpinned by CIMB's view that CIMB Niaga remains undervalued and by the group's long-term positive outlook on Indonesia. It pointed in particular to CIMB Niaga's strengths in wealth management, corporate banking, ASEAN connectivity, mass affluent banking and Shariah banking.
FREE-FLOAT RULES FORCE A STAKE REDUCTION
CIMB needs to reduce its stake in CIMB Niaga to comply with Indonesia's revised free-float rules. The regulations require the group to lower its ownership from 91.4% to at least 87.5% by March 2027 and to 85% by March 2028.
CIMB IB said three options remain under consideration to address the free-float requirement. These are placing shares with strategic investors at acceptable valuations, a re-IPO (initial public offering), which appears unlikely under current market conditions in Indonesia, and privatisation, which it described as currently the more strategic and credible option.
CIMB noted that various delisting options are available, including arrangements that allow minority shareholders to retain a residual stake after delisting. It cited the historical minority ownership arrangements at CIMB Thai and CIMB Bank Malaysia as precedents.
COST AND CAPITAL IMPACT OF PRIVATISATION
MBSB Investment Bank Bhd said in a separate note that CIMB owns 92.5% of CIMB Niaga. Taking the bank private at its current share price of 1,550 rupiah would imply a purchase consideration of 2.95 trillion rupiah (RM670 million), while a 30% premium would imply 3.84 trillion rupiah (RM871 million).
The privatisation transaction is estimated to reduce CIMB's latest CET1 ratio of 13.9% by 18 to 23 basis points. Management intends to use as little capital as possible, which points to opportunistic and gradual accumulation of shares.
DIVIDENDS, SURPLUS CAPITAL AND DEAL APPETITE
Preserving dividend upstreaming from CIMB Niaga to the group remains a key consideration in evaluating any strategic moves, CIMB IB noted. CIMB Niaga has a common equity tier 1 (CET1) ratio of 23%, and CIMB sees scope for capital optimisation, potentially towards 20%, although no formal target has been established.
On wider deal-making, CIMB remains disciplined, according to CIMB IB. The group is open only to small bolt-on opportunities in wealth management, small and medium enterprise banking, and Niaga Shariah, and it rules out large-scale transactions.