MUFG announced a tender offer on Tuesday for up to 75 per cent of Ayudhya’s shares, worth Y560bn ($5.6bn) based on its offered price of 39 baht a share.
Japan’s biggest bank by assets said it had already secured agreement from GE Capital, the Bangkok-based lender’s largest shareholder, to sell the US group’s 25.3 per cent stake. MUFG is paying a price equivalent to twice Ayudhya’s book value, which represents a roughly 50 per cent premium to the average market valuation of Thai banks, according to Bloomberg data.
The deal comes as Japan’s large banks redouble their efforts to diversify from their home market, which is characterised by weak demand for loans and relentless pressure on margins. The new regime of monetary easing unleashed by the new central bank governor, Haruhiko Kuroda, has provided a further incentive to put cash to work overseas.
Much more aggressive asset-buying by the Bank of Japan has caused volatility in the government bond market to rise sharply, threatening what had been a stable source of income and trading profit for the banks.
Southeast Asian economies are seen as particularly attractive, as they combine rapid growth in retail banking with high demand from a host of Japanese companies that have set up operations in the region. Japan is the largest foreign investor in Thailand, with particularly strong interests in the automotive, metal processing and electrical appliance and electronics industries. Net applications for investment by Japanese companies came to Thb150bn ($4.8bn) in the first four months of this year, two-thirds of the global total, according to the Thai Board of Investment.
These markets are also experiencing a withdrawal by capital-constrained European banks, which is presenting new opportunities for Japan’s cash-rich lenders. In May Sumitomo Mitsui Banking Corp, the main unit of Japan’s number three bank by assets, said it had agreed to buy 40 per cent of Indonesia’s PT Bank Tabungan Pensiunan Nasional for Rs13tn ($1.3bn).
MUFG’s offer for Ayudhya will begin in early November and close in December, the Japanese bank said, subject to approval from local authorities. It said it would run Ayudhya in co-operation with the Ratanarak family, which founded the bank in 1945 and is keen to hold on to its 25 per cent stake. It is also considering merging its own Thai operations with those of Ayudhya, known locally as Krungsri, to meet local rules on bank ownership.
MUFG was advised by Bank of America Merrill Lynch and GE was advised by Morgan Stanley.
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