CTBC Financial Holding Co (中信金控) yesterday said it would acquire a 35.6 percent stake in Thailand’s LH Financial Group PLC for NT$15.4 billion (US$471.02 million).
The companies have signed a legally binding memorandum of understanding following a year of negotiations, CTBC Financial said.
CTBC Financial is to acquire 7.55 billion newly issued shares through a private placement and it is to become the Thai company’s largest shareholder at about 2.2 baht per share, at a price-to-book value (PB) ratio of 1.67.
“The price of the stake acquisition is reasonable and comparable to the range of between 1.45 and 1.98 PB ratio seen in a number of acquisitions of Thai financial companies by other international players, such as Mitsubishi UFJ Financial Group’s acquisition of the Bank of Ayudhya PLC in 2013,” CTBC Financial president Daniel Wu (吳一揆) told an investors’ conference in Taipei.
There are few viable acquisition targets in Thailand, and the Thai government imposes stringent controls on the country’s financial sector, Wu said, adding that the country’s political situation did not affect its decision to buy shares in LH Financial Group.
Wu said that upon the deal’s completion and following the commencement of joint operations, LH Financial would expand the number of directors on the board from nine to 11, of which five seats are to be occupied by CTBC Financial representatives.
CTBC Financial senior vice president Rachael Kao (高麗雪) said that following the acquisition, the company’s capital adequacy ratio is expected to decline 8.8 percentage points to 133.3 percent, based on figures as of the end of December last year.
As the deal is conducted by CTBC Financial’s banking unit, CTBC Bank Co Ltd (中國信託銀行), the bank’s capital adequacy ratio is to drop by 0.35 percentage points to 10.67 percent, with Tier 1 ratio falling 0.7 percentage points to 12.28 percent, Kao said.
Wu yesterday reiterated that CTBC Financial does not have plans to raise capital. The firm last month canceled plans to raise NT$15.46 billion by issuing 920 million new shares at NT$16.8 per share.
LH Financial has a banking unit, a fund and a securities unit, and its net income last year was 1.65 billion baht (US$46.55 million).
Meanwhile, CTBC Financial yesterday acquired a NT$1.2 billion portfolio of corporate loans from ANZ Bank (Taiwan) Ltd, as part of its expansions plans focused on asset acquisition.
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