Japan's biggest bank, the Bank of Tokyo-Mitsubishi UFJ (BTMU), plans to buy as much as 75% of Thailand's fifth-largest bank, Bank of Ayudhya (BAY), in a deal worth up to 177 billion baht.
A Bank of Ayudhya branch in the Yaowarat area of Bangkok. PATIPAT JANTHONG
BTMU has signed a share tender agreement with GE Capital International Holdings Corporation regarding its shareholding in BAY, the Japanese bank said in a filing to the Tokyo Stock Exchange yesterday.
Under the agreement, the subsidiary of the Mitsubishi UFJ Financial Group will launch a voluntary tender offer for BAY shares at 39 baht per share.
About 560 billion yen (173 billion baht) will be required for the offer if all of BAY's shares except those held by the Ratanarak Group are tendered and purchased.
GE Capital will participate and tender its entire shareholding of 1.538 billion shares or 25.33% of BAY's total outstanding shares in the offer.
If the Ratanarak Group, a major shareholder in BAY, does not tender its 25% stake, then BTMU will purchase a maximum of 75% of BAY's total outstanding shares in the offer, as it does not set any minimum or maximum acceptance condition for the tender offer.
Once the offer is completed, the Japanese bank will become the major shareholder in BAY and a partner the Ratanarak Group in developing the bank's operations. The new shareholder and BAY will have discussions on collaboration in various fields to strengthen their strategic partnership.
To meet Bank of Thailand regulations, both banks will seek to merge their Bangkok branches, as the rule allows foreign banks to have only a single presence in Thailand.
''Such integration, once agreed, will take place following the voluntary tender offer completion,'' said BTMU.
The purchase would also be the biggest banking takeover in Asia by a Japanese bank, eclipsing the Sumitomo Mitsui Financial Group's announcement in May that it will buy a stake in Indonesia's PT Bank Tabungan Pensiunan Nasional for US$1.5 billion.
An analyst who asked not to be named said the deal will make BAY a global bank.
He also expects investors will be more likely to sell their BAY shares at the tender offer price.
''The voluntary tender offer should be started in December, so investors are unlikely to wait while the market fluctuates,'' said an analyst.
Shares in BAY rose 4.23% to 37 baht yesterday, bringing gains to 14% this year.
Arpaporn Sawaengpak, a vice-president of DBS Vickers Securities, said there will be a change in executives who are representatives of GE shortly after the deal is concluded.
However, it will be a challenge for Mitsubishi UFJ, which does not specialise in retail banking, to help BAY secure its foothold in retail banking, she said.
BTMU could strengthen BAY's corporate banking, while its Japanese customer base is another strength, said Ms Arpaporn.
Bualuang Securities said in a note that BAY's lending portfolio will increase significantly if the deal goes through. BTMU has a loan portfolio worth 210 billion baht, almost all of it corporate loans. With the Japanese bank's expertise in corporate and small and medium-sized enterprise (SME) loans, this will come as a boon to BAY if the Japanese bank acquires a sizeable stake, the note said.
''We will be in discussions with BTMU on future collaboration in various fields and truly believe that our strategic partnership will help reinforce BAY's leading position in Thailand, particularly in the SME and corporate banking platforms,'' said BAY chief executive Janice Van Ekeren.
BTMU's Bangkok branch, which has operated for 50 years, is the largest financial institution in terms of assets in both Japan's banking industry and foreign banks in Thailand. It has a presence in seven Asean countries.
At its Bangkok branch, about half of its 210 billion baht in assets is contributed by Japanese customers.
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