LAST week, this column discussed distorted market valuation methods that could hide a true fair value of a company, and this week, another perspective on valuation is presented to give readers points to ponder as to whether these transactions are seen as fair or otherwise.
Interestingly, both the transactions discussed this week involve two of Malaysia’s largest corporates and are index constituents of the FBM KLCI. The first transaction involves the acquisition of the remaining 30.95% stake in Maybank Ageas Holdings Bhd by Maybank for RM4.83bil from Ageas International Holdings NV.
Maybank Ageas is the holding company of Etiqa’s insurance businesses in Malaysia and Singapore. The deal was valued at 1.98 times price-to-book (P/B) and at approximately 15.3 times the price-to-earnings ratio of Maybank Ageas. The acquisition, valuing Maybank Ageas at RM15.6bil, would mean Maybank would fully own Maybank Ageas upon completion of the acquisition.
The rationale
Since the proposed acquisition was announced, Maybank’s share price has declined by 20 sen or 1.8% to RM10.60, which to a certain extent suggests the deal may not be seen as positive for Malaysia’s largest listed company by market capitalisation.
How so?
Firstly, as Maybank Ageas owns an insurance business, and it is typical for these companies to be valued on a P/B basis, it is more of a derived value of the business, as insurance businesses are typically valued at price to embedded value (EV).
EV combines an insurance company’s net assets with the discounted future value of profits expected from its existing policy portfolio but excludes any projected profit from new business.
Hence, unless Maybank Ageas’s EV is more than RM15.6bil, Maybank can be said to be overpaying. This fact was not disclosed by Maybank to investors.
A 100% ownership
The bargaining power of a majority controlling shareholder is strong when acquiring the remaining block of shares not already owned. Hence, in this case, Ageas can be said to not be in a position of strength to negotiate and command a premium price from Maybank for its stake in Maybank Ageas.
After all, there are not many buyers that can fork out close to RM5bil for a minority 30.95% stake in the company.
For Maybank, Maybank Ageas has been on the radar for a potential spin-off and to be listed on Bursa Malaysia. Instead, Maybank now proposes to own Maybank Ageas in full, and could this be a prelude to a potential initial public offering or IPO on Bursa Malaysia, as it will have greater control in making that call instead of being subject to Ageas’ consent?
Maybank’s 100% interest also has limited impact on its financial performance as with a 100% stake, the only difference in its financial statements is the exclusion of share of minority interest in its financial statements.
However, its proposed acquisition is not expected to impact its ability to maintain its high dividend payout as the acquisition is funded by its recent RM4.8bil tier-two subordinated sukuk murabahah issuance, under its upsized RM30bil sukuk programme. The savings from the removal of minority interest in its financial statements are expected to be more than the cost of the sukuk papers as they are issued at a 4.22% profit rate.
Pressing deal
On the same day, Maybank announced a RM4.83bil deal, another FBM KLCI constituent, Press Metal Aluminium Holdings Bhd, announced its plan to acquire 664.2 million shares representing 35.6% equity interest in PMB Technology Bhd (PMBT) from several connected shareholders for RM465mil, or at 70 sen per share.
These shareholders are also major shareholders of Press Metal with a 51.3% equity interest. With the sale of the shares held in PMBT by these shareholders to Press Metal, the latter’s shareholding will now increase to 58.8%. Upon completion of the proposed acquisition, the ultimate controlling shareholders of Press Metal and PMBT will remain unchanged.
Press Metal and the controlling shareholders have obtained an exemption from undertaking a mandatory offer as there is no change in the statutory control in PMBT. In terms of valuation, the PMBT shares acquired were just a shade below the last unaudited net asset per share of RM0.72 as at the end of March 2026, and well below its last traded price of RM1.78.
Post-announcement, Press Metal’s share price too has weakened and is down 0.6% since announcing the deal, although the share price reacted positively in the first two days, rising as high as 4.5%.
Subsidiary
Although loss-making, the acquisition of PMBT by Press Metal will result in the former being recognised in the latter’s books as a subsidiary company instead of an associate company.
In normal circumstances, this is a significant controlling move by Press Metal, as it will no longer equity account its share of profits/loss but will be consolidating the financial performance of PMBT into Press Metal. The fact that Press Metal did not pay a premium for the acquisition and is well below the market price as the ultimate shareholder in PMBT remains unchanged.
In similar transactions like this, an acquisition that triggers majority control will likely be priced not only well above net asset value, but even at a premium to market price.
Control
The above two cases allowed the offerors to gain control of their respective target companies. Maybank achieved full control of its insurance subsidiaries with the acquisition of Maybank Ageas, while Press Metal gained majority control of PMBT.
Maybank paid almost two times the book value of its target company, while Press Metal simply got a better deal due to no major change in the ultimate shareholding structure of PMBT and paid a price that is even below the target’s net asset value.
However, in Maybank’s case, the real issue was whether it paid a price that is at a discount or premium to Maybank Ageas’s EV, as that’s how insurance companies are valued today.
For comparison, other major insurance companies like AIA Group Ltd and Great Eastern Life Singapore Ltd are both trading at a premium to EV of about 21% and 5%, respectively, and on a price-to-book basis, at approximately 2.20 times and 2.05 times, respectively.