Kuala Lumpur: CIMB Group today announced that it has received approval from the Minister of Finance, Thailand for its purchase of a 42.13% stake in BankThai Public Company Ltd. The approval was given in a letter dated 9 October 2008, and paves the way for CIMB Group to emerge as the single largest shareholder in BankThai. The acquisition is now pending approval of Thailand’s Ministry of Commerce.
“We are pleased to receive this approval from the Thai authorities,” said Dato’ Sri Nazir Razak, Group Chief Executive, CIMB Group. “We look forward to completing the purchase soon and enabling BankThai to start growing again,” he said.
In June this year, CIMB Group entered into a share purchase agreement with Financial Institutions Development Fund (FIDF) to acquire the latter’s 42.13% stake in BankThai for a cash consideration of THB5.905 billion (RM577.4 million). On completion of the purchase, CIMB Group plans to launch a mandatory general offer (MGO) for the remaining shares it does not own and initiate a capital restructuring exercise of the bank. Assuming full acceptance of the MGO and a recapitalisation cost of RM500 to 600 million, CIMB Group’s total costs for the transaction would rise from RM577.4 million to approximately RM1.9 billion.
BankThai is the ninth largest commercial bank in Thailand in terms of total assets and has 147 branches across Thailand. It also has subsidiary businesses in stockbroking, insurance and asset management. BankThai has a solid deposit and lending business and operating base of SME and retail customers. Its recent financial performance has been weakened by write-downs and lending constraints arising from investment losses in foreign collateralised debt obligations (CDOs) last year. These CDOs were written down and sold in the 3rd quarter of 2008 but the bank has remained relatively inactive due to capital constraints.
“The fact that this is a banking turnaround situation has enabled us to acquire a precious controlling stake and limits our downside risk,” added Nazir. CIMB Group earlier estimated that, post-MGO and recapitalisation, its acquisition cost is equivalent to approximately 2.3 times Bank Thai’s adjusted book value.
“This acquisition is the ‘final jigsaw piece’ for our regionalisation agenda. And we remain comfortable with our acquisition price and turnaround plans despite the global financial crisis as we have always regarded this as a long term strategic move,” concluded Nazir.
The share purchase has already received approval from Bank Negara Malaysia and is expected to complete by the end of this year.