Bank of Nova Scotia has abandoned a deal to sell its Malaysian unit to a Taiwanese financial-services firm after failing to close the transaction before a deadline.
Under an agreement struck last May, Scotiabank intended to sell its entire stake in the Bank of Nova Scotia Berhad, a wholly owned Malaysian subsidiary, for US$255-million. The prospective buyers were Cathay United Bank and Cathay Life − both of which are subsidiaries of Taiwanese firm Cathay Financial Holdings Ltd.
The deal was subject to due diligence as well as approvals from authorities in Taiwan and Malaysia. But Scotiabank and Cathay Financial have agreed to scrap the sale, adding uncertainty to the Canadian bank’s future in Malaysia, where it has operated since 1973.
Scotiabank confirmed that the deal “did not close before a pre-agreed deadline, as a result it will not be moving forward,” in an e-mail from spokesperson Debra Chan. Though she said the bank “can’t go into details,” she added that the decision was not based on factors relating to the operation of the Malaysian business.
In a filing with the Taiwan Stock Exchange, Cathay Financial also said the deal couldn’t be closed in time, and “all parties agree” to terminate it.
The proposed deal with Cathay Financial was not financially material to Scotiabank, which is now “reviewing its strategic options for its Malaysia franchise.” The Bank of Nova Scotia Berhad was valued at $303-million as of the end of 2017.
On a conference call with reporters days after the deal was announced last year, Scotiabank chief financial officer Sean McGuckin explained that the bank had been “refining our Asian strategy for the last couple of years,” and that its focus was squarely on operations in North America and key Latin American markets – Mexico, Peru, Chile and Colombia.
“Malaysia was not a key element of that strategy,” Mr. McGuckin said at the time.
But Ms. Chan said the bank still “sees the region as an important part of its international footprint.”