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Malaysian bank beats 13 suitors
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The CIMB Group, Malaysia's second-largest financial services provider, will pay 5.9 billion baht to purchase a 42.13% stake in BankThai from the Financial Institutions Development Fund. CIMB beat out 10 other foreign institutions and three Thai institutions for the acquisition, including proposals by Standard Chartered and HSBC.
Dato' Nazir Razak, the CIMB Group managing director and chief executive officer, signed the share purchase agreement yesterday with Tongurai Limpiti, the head of the central bank's Financial Institutions Development Fund. The transaction is subject to regulatory approval by Thailand's Finance Ministry and Bank Negara Malayia.
But in one potential complication, Finance Minister Surapong Suebwonglee yesterday offered only lukewarm support for the transaction.
''I will have to consider whether the share sale is the best course of action or not. In principle, any sale must be for maximum benefits, as it is the ministry that has had to absorb the past losses incurred by the FIDF,'' he said.
''If we can sell these shares in the future at a better price than today, then we should not hurry to sell at a time when [BankThai] is posting losses and the buyer can push for a lower price,'' Dr Surapong said, adding that he did know the full details about the transaction or BankThai's finances.
He said the FIDF did not consult with him about the transaction. ''The authority for this transaction rests with the FIDF. It will have to take responsibility if damages incur.''
The sale comes amid an investigation announced last week by the Finance Ministry into the FIDF's past policies and actions regarding BankThai.
In any case, CIMB will pay 2.10 baht per share under the transaction, a significant premium over BT's last trading price of 1.35 baht and 2.91 times the book value as of March 31. BT shares have been suspended from trade at the bank's request since Thursday.
CIMB also will launch a mandatory tender offer for the remaining outstanding shares of BankThai at the acquisition price of 2.10 baht per share.
In a statement to the Bursa Malaysia, CIMB estimated that the total costs for the tender offer could be another 8.11 billion baht, assuming all shareholders accept the offer, including the 36.74% stake held by the US private equity firm TPG Newbridge.
CIMB estimated that it would likely have to pay another 500 to 600 million ringgit (5.1 to 6.1 billion baht) for an additional recapitalisation of BankThai.
''We are extremely pleased to have been successful in our bid,'' Dato' Nazir said in a statement. ''The stake in BankThai allows us to enter the commercial banking market in Thailand through a well known brand with relatively good scale. This deal also comes as a unique restructuring and value creation opportunity that plays to our strengths.''
He noted the efforts made by the FIDF and TPG to restructure BankThai's operations in recent months.
''Once it receives the much-needed injection of capital, balance sheet pressure on BankThai will ease and it can compete effectively again,'' Dato' Nazir said.
BT, Thailand's ninth largest bank with assets of 216 billion baht, lost two billion baht in the first quarter and 6.9 billion in 2007, largely on provisioning for losses in offshore collateralised debt obligations and sub-prime mortgages.
The CIMB Group has a market capitalisation of US$10 billion, with 24,000 employees in 11 countries. It opened CIMB-GK Securities (Thailand) in 2005.
Analysts said that the deal, while at a considerable premium over current market prices, was relatively inexpensive given the opportunity for CIMB to set up a new bank in Thailand.
Kavee Chukitkasem, head of research at Kasikorn Securities, said the price was more expensive than for other acquisitions, such as GE's investment in Bank of Ayudhya or Scotiabank's investment in Thanachart Bank.
''From another point of view, however, it would be impossible for anyone to set up a new bank in Thailand for just six billion baht,'' Mr Kavee said.
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