UPDATE 2-Thai bank Ayudhya to sell $400 mln stake to GE http://today.reuters.com/investing/FinanceArticle.aspx?type=mergersNews&storyID=2006-05-18T083351Z_01_BKK55270_RTRIDST_0_FINANCIAL-THAILAND-BAY-UPDATE-2.XML
Thu May 18, 2006
(Adds analyst comments, stock prices)
By Arada Therdthammakun
BANGKOK, May 18 (Reuters) - Thailand's Bank of Ayudhya PCL (BAY) (BAY.BK: Quote, Profile, Research) said it planned to sell a 25 percent stake in itself to a General Electric (GE.N: Quote, Profile, Research) subsidiary in a $400 million deal at a 13 percent discount to Wednesday's closing price. The deal, involving new shares in the mid-sized Thai bank at 16 baht ($0.418) per share, marks part of efforts by the U.S. company's financial arm to expand retail lending in the region.
The Thai bank said earlier this year it was looking for a strategic partner to help it with the increasingly competitive Thai banking industry, and that GE was the most likely candidate.
Shares in BAY, Thailand's sixth-largest bank by assets, fell more than 7 percent after the announcement on Thursday, touching 16.80 baht, their lowest since March 23, on concerns about the dilution effect of the placement and disappointment at the sharp price discount.
"Investors are quite disappointed with the offer price because it was lower than expected," said KGI Securities banking analyst Hataiporn Jirajariyavech.
BAY, valued at about $1.4 billion, told the Stock Exchange it would place new shares privately with GE Capital Asia Pacific Ltd subject to approval from the Bank of Thailand.
It did not say now many shares were involved, but the price of the deal would be worth 15-16 billion baht, or about $390-415 million, analysts said. At 0805 GMT, BAY shares were down 3.8 percent at 17.70 baht, while the main index <.SETI> was 2.23 percent lower.
The stock surged to 19.60 baht last week, its highest since December 1999, when Fitch upgraded BAY's national long-term and subordinated debt ratings. BAY, which has 654 billion baht in assets, had outstanding loans of 450 billion baht at the end of March.
BAY is 37 percent owned by the Ratanarak family and is already 32 percent owned by foreign investors, including State Street Bank and Trust (STT.N: Quote, Profile, Research), Mellon Bank (MEL.N: Quote, Profile, Research) and Morgan Stanley & Co International (MS.N: Quote, Profile, Research).
"PERFECT MATCH"
An executive of the bank, which has 490 branches and plans to boost the number to 550 by the end of this year, said the share deal with GE should be completed in the second half of this year.
BAY, like its mid-to-smaller sized peers, has said it needs a strategic partner to help strengthen its business as the banking sector gears up for expected liberalisation.
"They're a perfect match as they have the same objective to focus on retail businesses expansions," said Kavee Chukijkasem, head of research at Nomura Securities.
"BAY has aggressively expanded its branches but needs more funds, while GE carries a load of money but lacks a branch network."
GE already has a credit card joint venture with a subsidiary of BAY, while its wholly owned GE Money Bank operates consumer finance, store credit cards and hire-purchase services.
GE Money Bank, which has more than 3 million customers, has said it aimed to boost loan growth by 20 percent this year to 155 billion baht.
Earlier this week, BAY president Pongpinit Tejagupta told Reuters a new partner would boost its retail business to 30 percent of lending over the next three years from 13-14 percent now. ($1=38.30 baht)
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