Mitsubishi UFJ Financial Group, Inc.
(also known as MUFG) (
) strategizes to buy majority stake in the Thailand based-Bank of
Ayudhya. MUFG will acquire 75% stake for approximately ¥560
billion ($5.6 billion). The agreement is expected to be complete
by the end of Dec 2013. However, the deal awaits approval from
Thai and Japanese regulators and shareholders of Bank of Ayudhya.
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MUFG plans to expand its operations in Southeast Asia with the
acquisition. However, regulations in Thailand restrict foreign
banks with local branches to provide capital to its banks.
Therefore, MUFG will merge its Bangkok branch with Bank of
Ayudhya to smoothen its operations.
Terms of the Deal
As per the transaction, MUFG will initially acquire 25% stake
General Electric Company
). Following this buyout, MUFG will initiate a tender offer for
the remaining shares. As per the tender, expected to be initiated
in Nov 2013, MUFG will offer 39 Thai baht ($1.26) per share to
the Ayudhya shareholders.
Further, MUFG intends to operate the Bank of Ayudhya with
Thailand's Ratanarak family which continues to hold a 25% stake.
This deal will be the largest acquisition in Asia by a Japanese
bank. Moreover, it would be the second largest deal for MUFG, the
first being the ¥900 billion investment in Morgan Stanley, a U.S.
investment bank, in 2008.
Currently, Bank of Ayudhya holds assets worth ¥3.4 trillion.
Therefore, MUFG's lending balance is expected to catapult 350%
through the acquisition of Bank of Ayudhya.
In 2012, MUFG planned to acquire 20% stake in VietinBank from the
Vietnamese government for about ¥60 billion ($720 million).
Moreover, among other Japanese lenders, in May 2013,
Sumitomo Mitsui Financial Group Inc.
) signed a $1.5 billion deal to acquire 40% stake in PT Bank
Tabungan Pensiunan Nasional, an Indonesian lender. Further,
another bank -
Mizuho Financial Group, Inc.
) - purchased 15% stake in Vietcombank for $760 million in 2011.
Encouraged by the growing opportunities in retail banking
activities in Southeast Asia, Japanese lenders have chosen the
path of expansion in this region. Moreover, the move comes on the
heels of stagnate loan demand in domestic market in Japan.
Therefore, with strong balance sheets, Japanese banks are
diversifying from domestic market to overseas acquisitions.
Through its major subsidiaries and affiliated companies, MUFG
engages in a broad range of domestic and international financial
operations, including commercial banking, investment banking,
trust banking and asset management services, securities
businesses, credit card businesses, and provides related services
to individual and corporate customers. Therefore, this deal would
help strengthen Asian operations of MUFG.
Currently, MUFG carries a Zacks Rank #1 (Strong Buy).