TPG Newbridge buys a stake in BankThai

The private equity firm will subscribe to new shares in the Thai bank, paying $70 million for a 25% stake.
BankThai informed the Thailand Stock Exchange yesterday that its directors have approved an investment of Bt2.3 billion ($70 million) by TPG Newbridge in the bank for a 24.99% stake. TPG will subscribe to new shares. The investment is yet to be approved by BankThai shareholders.

BankThaiÆs consolidated book value per share as at December 31 last year was Bt3.09. At the agreed price of Bt4.17 per share, TPG Newbridge has paid a book value multiple of 1.35 times. The shares have recently traded around Bt4.30-4.40, so TPG is buying new shares at a discount of around 5% to the traded price.

BankThai will simultaneously issue other, unnamed investors shares representing 7.9% of its capital, at the same price, totalling Bt730 million ($22 million). Investors were disappointed at the news of both the pricing and the size of the stake. Markets had been speculating that TPG would buy around 31%, at a premium to the prevailing share price. The share lost some ground yesterday in early trading, in a weak Thai market.

BankThai is the eighth largest bank in Thailand by assets and was formed through the amalgamation of 14 financial institutions. Over the past few years, the bank has focused on cleaning up its balance sheet and is now focused on the consumer and SME (small to medium enterprise) banking areas.

Currently, the largest shareholder in BankThai is the Financial Institutions Development Fund (FIDF), the vehicle through which the Bank of Thailand holds its 49% stake in BankThai. Post the new share issuance, FIDF will be diluted.

Bank of Thailand said in 2006 it would sell stakes in BankThai, Krung Thai Bank and Siam City Bank to strategic investors to improve the capabilities if the state-owned banks.

Analysts were generally positive about the $92 million capital infusion on BankThaiÆs balance sheet though some did speculate about what TPGÆs game plan for the Thai bank will be. It is generally agreed that the bank needs more sophisticated banking systems and procedures.

This is the second foreign investment in the space of a few months in ThailandÆs banking sector. In August 2006, GE Money announced an agreement to acquire a 25.4% interest (on a fully diluted basis) in the Bank of Ayudhya for $626.4 million. Bank of Ayudhya is the sixth largest bank in Thailand in terms of assets and loans, with 500 branches. The transaction was not strictly comparable to TPGÆs investment on various parameters. Among other things, Bank of Ayudhya and GE Money were well known to each other as they are joint venture partners since 2001 in a company which offers credit cards and personal loans to Thai consumers.
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