Trading of Jerneh Asia Bhd and Paramount Corp Bhd shares are suspended today, raising speculations that a buyer has been found for Jerneh Insurance Bhd, which is 80:20 owned by Jerneh Asia and Paramount.
Yesterday, both Jerneh Asia and Paramount had sought for a suspension of trading on their stocks from 9am to 5pm today. In separate announcements, the two companies said the shares trading suspension was due to a material announcement pending on the proposed disposal of Jerneh Insurance.
Yesterday, The Edge Financial Daily reported that US insurer ACE Ltd was speculated to be the latest potential suitor that was keen to acquire Jerneh Insurance.
ACE has a local insurance outfit, unlisted ACE Synergy Insurance Bhd, a general insurer and re-insurer. ACE owns 51% in ACE Synergy while the remaining 49% is held by Advance Synergy Capital Bhd.
A foreign newswire yesterday reported that ACE would acquire Jerneh Insurance, citing two people familiar with the deal.
Jerneh Asia first announced that it was entering talks to sell Jerneh Insurance in December 2009. Subsequently, in May this year, Jerneh Asia announced that it had received Bank Negara Malaysia’s (BNM) approval to enter into an agreement with a potential buyer for the 100% stake in the insurance unit.
Since Jerneh announced that it was entering into talks to sell the unit, several names have propped up. These included Italian insurance outfit Assicurazioni Generali SpA, HSBC and South Korea’s Samsung Fire and Marine Insurance Co.
Talks were rife that the deal would be finalised soon, as Jerneh Asia had been rising steadily this year, and is now trading at RM3-levels. Jerneh traded at RM1-levels in 2009.
Nevertheless, some industry sources said there was a delay in closing the deal as the potential buyer could be taking a closer look at Jerneh Insurance’s business model, which could result in changes in valuation.
There were speculations that Jerneh Insurance could be sold for about RM700 million, which would price the insurer at 2.4 times price-to-book.
However, some industry players believed that the valuation was too high and Jerneh Insurance is more likely to be valued between 1.3 times and 1.8 times.
Jerneh Asia’s proposed disposal of its insurance arm is among several deals that have come at a time when BNM announced measures to liberalise the financial sector, which included the consolidation of the financial sector.
In June, Hong Leong Financial Group Bhd announced that it would sell its insurance arm Hong Leong Assurance Bhd and merge its general insurance businesses with Japan’s Mitsui Sumitomo and its locally-incorporated unit.
This article appeared in The Edge Financial Daily, September 14 2010.
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