MERGERS & ACQUISITIONS
Japan's Mitsubishi UFJ Financial Group (MUFG) is in advanced talks to acquire a majority stake in Bank of Ayudhya Plc (BAY), Thailand's fifth-largest lender, in a deal worth an estimated 125 billion baht, Reuters has reported.
Sources familiar with the matter said on Saturday that the deal was making progress after a long negotiation complicated by Bank of Thailand regulations.
MUFG, Japan's largest lender by assets, has been in talks to buy General Electric's 25% stake in BAY for months, but the central bank's "single presence" policy on bank ownership has been a hurdle as MUFG has large operations with Japanese corporations in the country.
The local unit of MUFG, Bank of Tokyo-Mitsubishi UFJ, opened its Bangkok branch in 1962. Its outstanding loans in Thailand stood at $7.9 billion as of the end of September last year.
Dow Jones Newswires quoted a source as saying that MUFG intends to first buy out GE Capital's entire 25% stake in the Thai bank.
It would then launch a tender offer for the remaining shares, but would seek to keep the other major shareholder, the Ratanarak family which holds 22%, as a partner, the Dow Jones report said.
Reuters said that MUFG would then merge its Thailand operations with BAY, said the sources, who were not authorised to talk about the matter publicly.
The deal is likely to be worth about $4.1 billion, or about 125 billion baht, a source told Reuters. It would be the biggest acquisition by a Japanese bank in Asia.
MUFG president Nobuyuki Hirano has said that his company was looking to acquire an Asian bank as the group's hub in the region, much as it had done successfully in the United States with California-based UnionBank, as Japanese banks seek to go beyond wholesale businesses into local retail and small and medium-sized enterprise (SME) business banking.
Last month, Sumitomo Mitsui Financial Group agreed to buy a 40% stake in the Indonesian bank BTPN for $1.5 billion.
The BAY deal, if it goes ahead, would be the second-largest foreign acquisition by a Japanese bank following the 900 billion yen that MUFG paid for a 21% stake in the US brokerage Morgan Stanley, the Nikkei reported in Tokyo.
MUFG is in the final stages of talks with the Ratanarak family and GE, with the aim of formally announcing the acquisition early next month, the Nikkei said.
BAY, which has a market value of nearly $6.38 billion (198.93 billion baht), is the leader in the Thai retail and consumer lending market. It is also growing in SME lending, which would allow MUFG to expand its customer base in Thailand, according to the Nikkei.
General Electric has been looking to sell its remaining 25.3% stake in BAY as it divests non-core assets across the world. The US conglomerate bought a stake of about 33% in BAY in 2007 for 22.3 billion baht, or $626 million based on the exchange rate at the time.
In September last year, GE sold a 7.6% stake in BAY, raising about $466 million.
GE has been selling non-core businesses under chief executive Jeff Immelt, with the sale of the Thai bank stake part of the overall restructuring.