Investors

1. INTRODUCTION

We refer to the announcement dated 2 June 2021 between Axiata and RHB Bank on the Memorandum of Understanding (“MOU”) to jointly explore potential collaboration opportunities including to jointly apply to BNM for a digital banking license.

Axiata and RHB Bank have agreed to collaborate and to jointly apply to BNM for a digital bank license, and the proposed Axiata entity selected to collaborate with RHB Bank for the joint application for the digital bank license is Boost Holdings.

In relation to the foregoing, the Board of Directors of Axiata wishes to announce that Boost Holdings and RHB Bank have on [2] June 2021 entered into a heads of agreement (“HOA”) setting out the terms of the proposed application to BNM for a digital banking license.

2. PROPOSED TERMS OF HOA

Boost Holdings and RHB Bank (collectively the “Parties” and individually, the “Party”) have agreed to enter into the HOA to set out the proposed terms of the application of the digital banking license and agree to be legally bound to undertake the formation and funding of the digital bank based on the terms of the HOA. 

The key salient terms of the HOA are as follows:

a) Identity of the digital bank

The Parties will as soon as reasonably practicable following the date of this HOA, discuss in good faith and agree whether the digital bank will be a newly incorporated company for the purposes of the application, or it will be an existing entity named as Axiata Digital Capital Sdn Bhd (“Aspirasi”).

If regulatory requirements and/or directions require so, the Parties agree, as soon as practicable, to discuss in good faith and identify an alternative entity which fulfils any such relevant requirements and/or directions. 

b) Submission of the application of the digital bank license

The Parties shall use all reasonable and commercial endeavours to submit the application to BNM for the digital bank on or before 30 June 2021.  (“Submission Date”)

c) Capital requirements of the digital bank

The Parties agree that the minimum initial issued share capital of the digital bank as required by BNM under applicable laws shall be RM100 million unimpaired by losses or any other amount as is required by BNM pursuant to any applicable laws.

d) Contribution of assets into the digital bank

The Parties agree that as soon as possible after the date of this HOA but prior to the Submission Date, they shall agree in writing, the multiples which will be applied in arriving at a valuation of the business of Aspirasi, either as the applicant of the digital bank license or the assets of Aspirasi to be injected into the digital bank.

The Parties agree that as soon as possible after the date of this HOA but prior to the Submission Date, to identify other assets that can be injected into the digital bank and the valuation of such assets.

The Parties agree that any additional assets to be injected into the digital bank shall as soon as possible after the date of this HOA but prior to the Submission Date be clearly identified and subject to due diligence and thereafter the Parties shall mutually agree in writing the multiplies which will be applied in arriving at the valuation of the additional assets.

e) Shareholding structure of the digital bank

Boost Holdings shall hold 60% of the equity share capital of the digital bank with RHB Bank holding the remaining 40% of the equity share capital.

f) Other transaction documents

The Parties shall, as soon as reasonably practicable following the date of the HOA but before the Submission Date, agree the details of the number of shares they will each subscribe for and the subscription price per share (“Subscription Agreement”).  The agreed form of the Subscription Agreement shall be executed on a date to be agreed between the Parties, being a date as soon as reasonably practicable following BNM’s approval of the application for the digital bank license.

The Parties agree that as soon as practicable after the date of this HOA but before the Submission Date, to confirm the agreed terms or form of the shareholders’ agreement which will govern the relationship between the Parties as regards the digital bank (“Shareholders’ Agreement”). The agreed form of the Shareholders’ Agreement shall be executed on a date to be agreed between the Parties, being a date as soon as reasonably practicable following BNM’s approval of the application for the digital bank license.

g) Target segment of the digital bank

The Parties agree that the digital bank shall focus on the segments of the market who are underserved, unserved and/or unbanked primarily within Malaysia.

h) Termination

The HOA may be terminated in the following circumstances:

I) the digital bank application has been notified by BNM as unsuccessful;

II) BNM has notified parties that the digital bank application will not be processed without material changes which will negatively impact on the commercially agreed arrangement of the Parties in relation to the digital bank

III) BNM, during its initial consultation stages recommends Parties to materially change their intended commercial arrangements in respect of the digital bank whereby such recommendations are not able to be resolved between the Parties;

IV) BNM imposes conditions on the grant of the digital bank licence which the Parties are unable to comply with or which would materially and negatively impact on the commercially agreed scope of the joint-venture or either Parties;

V) where the due diligence performed on assets (which includes Aspirasi) that is to be injected into the digital bank reveals that there are material issues or material gap in information which cannot be resolved which will result in a negative impact to the Parties;

VI) where subsequent due diligence performed on agreed assets (which includes Aspirasi) after submission but prior to operationalisation reveals that there are fraud or material breaches of any applicable laws which would result in material reputational damage to the Parties which the Parties cannot resolve;

VII) the valuation methodology (valuation multiples or range) of Aspirasi or any identified assets to be injected to the digital bank cannot be agreed upon in good faith by the Parties; and

VIII) the non-terminating Party fails to rectify a breach within thirty (30) days upon notice.

Further, the HOA will be terminated upon execution of the Subscription Agreement and Shareholders Agreement and any other transaction documents to be entered into between the Parties required for the formation for the digital bank.

i) Exclusivity

The Parties agree that it shall not, and shall procure that no member of its group and/or any of its or any other member of its group’s employees and agents, shall make any discussions or negotiations with any other person on matters covered under this HOA until BNM notifies the Parties that the application for the digital bank license has been unsuccessful.

3) INFORMATION ON RHB BANK

RHB Bank Berhad, the holding company for the RHB Banking Group, was incorporated in Malaysia on 4 October 1965 as a public limited liability company under the name of Development and Commercial Bank Berhad Limited.  Subsequently, on 15 April 1966, it changed its name to Development & Commercial Bank (Limited) Berhad.  It then changed its name to Development and Commercial Bank Berhad on 20 September 1982, to DCB Bank Berhad on 17 December 1994 before assuming its present name on 1 July 1997.  RHB Bank was listed on the Main Market of Bursa Malaysia Securities Berhad on 28 June 2016 replacing RHB Capital Berhad as the holding company of the RHB Banking Group.

RHB Banking Group is the fourth largest fully integrated financial services group in Malaysia by asset size.  RHB Banking Group’s core businesses is streamlined into six main business pillars, namely Group Retail Banking, Group Business & Transaction Banking, Group Wholesale Banking, Group Shariah Business, Group International Business and Group Insurance. Group Wholesale Banking comprises Corporate Banking, Investment Banking, Group Treasury and Global Markets and Asset Management.

All the six business pillars are offered through RHB Bank and its main subsidiaries – RHB Investment Bank Berhad, RHB Islamic Bank Berhad and RHB Insurance Berhad, while its asset management and unit trust businesses are undertaken by RHB Asset Management Sdn Bhd and RHB Islamic International Asset Management Berhad. RHB Banking Group’s regional presence now spans nine countries including Malaysia, Singapore, Indonesia, Thailand, Brunei, Cambodia, Vietnam, Lao PDR and Myanmar.

4) RATIONALE OF THE HOA

Axiata and RHB Bank have agreed to collaborate and to jointly apply to BNM for a digital banking license.  The rationale of the HOA is to set out the terms of the joint application to BNM for the digital banking license and the conduct, funding and formation of the digital bank. 

5) EFFECTS OF THE HOA

The HOA will not have any effect on the issued share capital of Axiata and the HOA is not expected to have any material effect on the net asset, gearing and earnings of the Axiata group of companies for the financial year ending 31 December 2021.

6) DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTEREST

None of the Directors or major shareholders of Axiata as well as persons connected with them have any interest, direct or indirect, in the HOA, saved as disclosed below:

1. As of 21 May 2021, the Employees Provident Fund Board (“EPF”), a major shareholder of Axiata with a 17.17% shareholding, also holds equity interest of 41.21% in RHB (as of 17 May 2021).  

7) APPROVAL OF SHAREHOLDERS

The HOA does not require nor is it subject to the approval of the shareholders of Axiata. 

This announcement is dated 2 June 2021.