Bank of Tokyo-Mitsubishi UFJ is in advanced talks to buy RBS Australia’s Sydney-based infrastructure advisory unit and its portfolio of public-private project finance assets.
The talks reflect MUFG’s determination to expand its international operations as its domestic lending market stagnates and follows its November 2010 deal to acquire £3.3bn ($5.3bn) worth of assets in Royal Bank of Scotland’s project finance portfolio in Europe, the Middle East and Africa.
The 30-strong Sydney unit, set up by Dutch lender ABN Amro more than a decade ago, is one of the largest groups specialising in private-public partnerships in Australia.
Its PPP projects include highways, prisons, medical facilities and a A$2.9bn (US$3.1bn) tunnel project in Brisbane.
The sale price under discussion was unclear – largely because of the nature of the PPP business, which relies more on arranging finance than holding investments.
The talks come as RBS, which is 83 per cent-owned by the UK government, steps up its asset disposal programme and retreats from project finance worldwide.
The bank recently sold 318 of its UK branches to Santander of Spain, among other asset sales.
RBS Australia and MUFG on Wednesday both declined to comment.
RBS acquired the unit with ABN Amro’s Australia and New Zealand operations in 2008, after the carve-up of the Dutch bank following the €71bn ($24.5bn) joint takeover by RBS, Santander of Spain and Fortis of Belgium.
Under ABN Amro, the unit benefited from a surge of interest in PPP projects and to date has delivered about 30 such projects throughout Australia and New Zealand.
At its peak in 2006-07, it handled projects worth more than A$7bn.
The unit is currently involved in the construction phase of projects worth a total A$5bn, including a schools project in Victoria, a community health services project in Sydney and the A$3.6bn NewSouth Wales rolling stock project.
MUFG, which bought UnionBankCal in 2008 and acquired two smaller US lenders in 2009, has stated its ambition to become one of the top five commercial banks in the world by market capitalisation.
The bank, which also spent $9bn to acquire a 24 per cent stake in US investment bank Morgan Stanley, raised Y1,000bn in a share sale in December 2009.
The deal also highlights MUFG’s growing ambitions in project finance abroad, as domestic lending continues to stagnate.
MUFG could benefit from strengthened project finance expertise in Japan, where the government is keen to make greater use of private finance in public projects.
The government’s committee for the reconstruction of the Tohoku region is proposing to tap project finance lending to fund the large amount of reconstruction work needed to rebuild the earthquake and tsunami-devastated north-eastern coast of Japan.