Standard Chartered Bank pays $413 million to acquire Pakistani bank

Standard Chartered is to pay $413 million to acquire 80.9% stake in PakistanÆs Union Bank making Standard Chartered the sixth largest bank in the country by market share of assets.
On August 9 Standard Chartered PLC announced that it will pay $413 million to acquire an 80.9% stake in PakistanÆs Union Bank. News of the transaction has been bubbling in the market for almost a month. The acquisition will make Standard Chartered the 6th largest bank in Pakistan by market share of assets.

The transaction will be effected by a Standard Chartered subsidiary, Standard Chartered Bank (Pakistan) Limited. In the country Standard Chartered currently has a network of 46 branches spanning 10 Pakistani cities.

Union Bank has shown impressive growth since it was established in 1991 and is today PakistanÆs 8th largest bank by market share. It serves about 400,000 retail customers through a network of 65 branches in 22 Pakistani cities.

As per takeover laws in Pakistan, Standard Chartered is obliged to make an open offer for the remaining shares. Union Bank is listed on the Lahore, Karachi and Islamabad stock exchanges. The offer is expected to open around August 12 and close around September 1.

Standard Chartered is paying 17.1 times Union BankÆs reported after tax 2005 earnings and 5.6 times its most recently declared, first quarter 2006, net asset value. Standard Chartered announced that it expected the acquisition to be earnings accretive in this calendar year and that it would finance the acquisition through internal resources.

Bryan Sanderson, Standard Chartered's Chairman saysôPakistan is a strongly growing country that is integral to Standard CharteredÆs Middle east and other South Asia strategy. The acquisition of Union Bank will significantly increase Standard CharteredÆs presence in this important market.ö

Mervyn Davies, Group CEO adds: ôStandard Chartered is the leading international bank in Pakistan and Union Bank will materially enhance its market position. Union bank has grown well under its strong management team and we will drive further growth by adding Standard CharteredÆs products and processes as we have done successfully in other markets.ö

Commenting on the development PakistanÆs Prime Minister Shaukat Aziz told media the acquisition would provide job opportunities and augured well for the future of the country's financial sector, which has undergone major reforms. Aziz further told Reuters "we are very pleased with this acquisition because it indicates confidence of major investors in Pakistan's economy and structural reforms". PakistanÆs reforms programme has had some hiccups most recently in June when the countryÆs Supreme Court stopped the privatisation of Pakistan Steel Mills. However, its government remains committed to the privatisation programme and this was the main theme of the finance ministerÆs address to investors at the Credit Suisse conference in Hong Kong earlier this year.

At its annual general meeting in May Standard Chartered had said its ôunique proposition û an Asian-led bank, denominated in dollars, with London governance û continues to be popular with investorsö. Standard Chartered has been on an acquisition-led growth drive to consolidate its presence in Asia. In Thailand in 1999 it acquired 75% of Nakornthon Bank and in 2005 bought most of the balance. In India in 2000 it bought Grindlays making it the largest international bank in the country. In Indonesia in 2004, with a partner, it bought a controlling stake in Bank Permata. In China in 2005 Standard Chartered bought a strategic stake in China Bohai bank. And in South Korea, Standard CharteredÆs acquisition of Korea First Bank, which it announced in January, 2005 represented at the time the largest foreign investment in South KoreaÆs financial industry.

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