Khazanah eyeing GE's US$1.8b Thai bank stake

SURPRISE MOVE: Latest decision pits state investor against Japan banking giant MUFG

KHAZANAH Nasional Bhd is seeking to buy General Electric's US$1.8 billion (RM5.61 billion) stake in Bank of Ayudhya (BAY), sources familiar with the matter said yesterday, pitting it against Japanese banking giant Mitsubishi UFJ Financial Group (MUFG).

Khazanah's bid for GE's 25.3 per cent stake came as a surprise, the sources said.

The proposed acquisition would be the largest purchase of an overseas banking asset by Khazanah as it plays catch-up with Singapore state investor Temasek Holdings Pvt Ltd.

The Malaysian sovereign wealth fund currently manages a portfolio that is just a quarter of the US$158 billion (RM493 billion) of assets held by its neighbouring rival.

Khazanah had in the past shied away from taking large banking stakes overseas, focusing on healthcare assets in Singapore and Turkey as well as real estate deals. The bid for GE's stake would mark a shift in Khazanah's strategy.

A successful acquisition of the stake in BAY would bring Khazanah closer to Temasek in terms of investment approaches.

The Singapore state investor already owns sizable shares in Standard Chartered plc, China Construction Bank Corp and Indonesia's Bank Danamon.

The Malaysian state investor is acquiring assets in neighbouring emerging markets as the outlook for Southeast Asian economies remains resilient in the face of global economic uncertainty.

Some analysts say Thailand is witnessing its best investment cycle in 20 years. BAY, which has a market value of nearly US$7 billion, is the leader in the Thai retail and consumer-lending sector. It is also Thailand's fifth largest lender.

General Electric Co is selling its remaining 25.3 per cent stake in BAY as it divests non-core assets across the world.

Officials from Khazanah and GE declined to comment.

The state investor is also picking up insurance assets.

Khazanah, which owns a nearly 30 per cent stake in Malaysia's second-biggest bank CIMB Group Holdings Ltd, recently teamed up with Sun Life Financial Inc to buy a 98 per cent stake in an insurance joint venture between CIMB and Aviva plc.

This week, Khazanah made a preliminary bid to acquire a US$500 million stake in unlisted Thai Life Insurance Co Ltd.

GE is trying to finalise a preferred bidder for the BAY stake soon, but the deal is facing regulatory bottlenecks, the sources added.

MUFG, which banking sources saw as a frontrunner in this race, wants to keep its branch in Bangkok even if it buys the stake in the Thai lender, something that Thailand's single-presence policy restricts, said sources with direct knowledge of the matter.

MUFG does not disclose much on individual country operations, but says core unit Bank of Tokyo-Mitsubishi UFJ's outstanding loans in Thailand stood at US$7.9 billion as of the end of September.

The bank opened its Bangkok branch in 1962.

Foreign banks are keen to boost their presence in Southeast Asia's booming economies, but regulatory obstacles have made deals difficult.

A US$7.3 billion takeover bid by DBS Group Holdings for PT Bank Danamon is still stuck with Indonesian regulators 10 months after Singapore's biggest bank agreed to buy Temasek's controlling stake in Indonesia's sixth-biggest bank.

Temasek owns about 29 per cent of DBS.

BAY's sale process began late last year with the appointment of Morgan Stanley as a sell-side adviser.

GE has been selling non-core businesses under chief executive Jeff Immelt, with the sale of the Thai bank stake part of the overall restructuring. Reuters