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Principal to raise stakes in JVs with Malaysia’s CIMB

CIMB Group plans to sell partial stakes in its asset management subsidiaries to joint venture partner Principal Financial Group, according to CIMB’s filing with Bursa Malaysia.
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CIMB, Malaysia’s second largest banking group by assets, announced in a filing to the local exchange last Thursday that it had signed agreements with US-based Principal on a disposal of stakes. The US firm will acquire 20% and 10% in CIMB-Principal Asset Management Group (CPAM) and CIMB-Principal Islamic Asset Management (CPIAM), respectively. The latter manages institutional mandates while adhering to shariah principles.

Upon completion, Principal will raise its shareholding in both entities to 60% and CIMB will retain 40%, according to the filing to the exchange. The firms expect the transactions to complete in the second quarter this year, subject to the regulatory approval.

Principal will pay 470.3m ringgit ($118.84m) for the additional stakes. The Malaysian bank is expected to recognise a gain on disposal of 950m ringgit ($239.9m) and a Common Equity Tier 1 ratio improvement of 18 basis points upon completion.

The new ownership structure aims to strengthen the capability of the joint ventures to provide products and services, CIMB said in the statement.

The acquisition of stakes will also help align the existing investment management teams in the JVs with Principal Global Investors, the asset management arm of Principal, and leverage the US firm’s global distribution capabilities and asset management franchise.

The two firms will continue to be managed by both CIMB and the Principal Financial Group. The change in ownership will not have any material effect on CIMB’s consolidated gearing and net assets for the financial year ending 31 December 2018, according to the statement.

The joint ventures were formed in 2004 and have focused on investing in Southeast Asia. They have operations in Malaysia, Singapore, Indonesia and Thailand.

The partnership between CIMB and Principal manages around RM70b of assets in the region.

Part of the Mark Allen Group.