Under local rules, Vertical Theme needs to submit an application to Malaysia’s central bank to start any talks. If a deal goes through, DBS may consider raising its stake in Alliance to up to 49% via a voluntary partial general offer, the people said.
Alliance Bank shares rose as much as 1.2% in Kuala Lumpur on Thursday. The lender has a market value of around US$1.7 billion ($2.33 billion). DBS climbed up to 1.3%. The Singaporean lender has a market value of US$91 billion.
A deal for Alliance would give DBS a foothold in Malaysia, where Singaporean rivals Oversea-Chinese Banking Corp. and United Overseas BankLtd. already have an established presence.
Singaporean state investor Temasek Holdings Pte owns 49% of Vertical Theme via Duxton Investment & Development Pte, while the remainder is held by RRJ Capital founder Richard Ong, hotelier Ong Beng Seng and corporate adviser Seow Lun Hoo through Langkah Bahagia Sdn.
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Temasek also has a 31.9% stake in DBS, data compiled by Bloomberg show.
Deliberations are ongoing and Vertical Theme may decide not to pursue a transaction, the people said.
A representative for DBS declined to comment. Vertical Theme’s backers also declined to comment.
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Outgoing DBS Chief Executive Officer Piyush Gupta has said that Malaysia, India and Indonesia are key targets for expansion. Among recent moves, DBS has made an initial proposal to buy PT Bank Pan Indonesia, Bloomberg News reported in December, while it has also received regulatory approval to increase its holding in its Chinese securities venture to 91%. Tan Su Shan will succeed Gupta as CEO in March.
Reuters reported in November that DBS was exploring expanding into Malaysia, including via stake purchases in banks such as Alliance Bank.
