Siam Commercial Bank (SCB) has won Bank of Thailand approval to widen the single lending limit ratio for CP Group from 25% of SCB's capital base to 60% to accommodate CP All's acquisition of Siam Makro.
It is the largest global merger and acquisition (M&A) activity in the retail sector this year.
SCB already lent 70-80 billion baht to CP Group, the parent company of CP All, ahead of the deal.
A central bank regulation limits the total loans a bank can lend to a group of companies to no more than 25% of the bank's capital base. However, banks can seek an exemption on a case-by-case basis.
The bank's capital base stands at 250 billion baht.
SCB, the country's third-largest bank by assets, has been appointed the sole financial adviser and one of the joint mandated lead arrangers and underwriters of CP All, the local operator of 7-Eleven convenience stores, for the acquisition of a 64.3% stake of Siam Makro from the Netherlands-based SHV Holdings for about 121.54 billion baht.
Following the acquisition, CP All will make a tender offer to buy the remaining shares owned by other shareholders as required by the Stock Exchange of Thailand, increasing the deal's value to 188.88 billion.
To finance the deal, CP All seeks bridge loans with a one-year maturity worth 90% of the 188.88 billion baht, while the remaining 10% will come from its cash flow. Most of the loans will be in US dollars.
Several financial institutions are expected to join in the syndicated loans with each institution chipping in an equal amount.
SCB is the only local bank joining the syndicated loan deal.
Others include HSBC, Standard Chartered Bank, UBS AG and Sumitomo Mitsui Banking Corporation.
After the one-year bridge loan is due, SCB will seek other financial instruments to refinance the loan in order to help CP All reduce financial costs.
Arthid Nanthawithaya, a senior executive vice-president of SCB, said the bank still has other M&A deals in the pipeline.
Its solid capital adequacy ratio is above 15% of risk-weighted assets compared with the central bank's requirement of 8.5% and is supported by improving profitability.
SCB reported the industry's highest net profit of 13.1 billion baht for the first quarter, up by 30.9% year-on-year.