Canadian financial services provider Bank of Nova Scotia, or Scotiabank, (BNS,BNS.TO) announced that its affiliate Thanachart Bank Thursday confirmed an agreement to acquire almost 48% of Thailand's Siam City Bank, currently owned by Thailand's Central Bank through the Financial Institutions Development Fund.
Halifax, Canada-based Scotiabank is operating in Thailand since 1981, providing corporate lending, trade finance and treasury services to local and international companies. The bank also operates in 12 countries and territories in the Asia-Pacific region. In 2007, Scotiabank acquired 24.99% of Thanachart Bank and increased this stake to 49% in 2009.
Thanachart Bank, with about THB 433 billion, or C$13.9 billion, in assets, is one of the fastest growing banks in Thailand. The bank operates 256 branches and about 400 automated banking machines, or ABMs, across the country with over 9,000 employees. The bank provides full range of financial services through subsidiaries in fund management, brokerage activities, insurance and leasing. Thanachart Bank is also the leading automobile lender in Thailand with a 22% market share for new and used autos.
Siam City Bank is the eighth largest bank in Thailand with about THB 423 billion, or C$13.9 billion, in assets. The bank has a nationwide distribution network of 413 branches and almost 1,700 ATMs. Last year, Siam granted 9 % of all new mortgages in Thailand. It has over THB 50 billion, or C$1.7 billion, in residential mortgage loans.
Scotiabank stated that Thanachart Bank will launch a tender offer for the remaining shares in Siam City Bank upon closing of the 48% stake. This is in accordance with the securities laws in Thailand. Thanachart Bank and Siam City Bank would be merged following the completion of the tender offer and any additional regulatory approvals. Scotiabank would continue to own 49% of the merged bank, to be known as Thanachart Bank. Thanachart Capital Pcl would own almost all of the remaining 51%.
The combined bank will have more than 660 branches, 2,100 ABMs, and 18,000 employees. Based on assets and branches, the combined bank will be the fifth largest bank in Thailand.
As part of the financing for the transaction, Scotiabank and Thanachart Capital would subscribe on a pro rata basis to additional shares in Thanachart Bank with Scotiabank contributing approximately C$650 million in capital to the bank.
Further, the bank said that upon closing, this transaction would be immediately accretive to Scotiabank. The deal is subject to regulatory approvals in Thailand.
Commenting on the deal, Rob Pitfield, Scotiabank Group Head, International Banking, stated, "This market has solid fundamentals and good prospects for long-term growth. Scotiabank remains committed to pursuing the right growth opportunities and this agreement is a significant step forward in Asia to complement a diversified emerging market strategy in the Caribbean, Central America and Latin America."
Earlier this week, Scotiabank reported an increase in first-quarter profit, helped by higher net interest income, an increase in net gains on securities as well as strong trading results. The bank's net income available to common shareholders increased to C$939 million or C$0.91 per share from C$805 million or C$0.80 per share in the previous year. On a taxable equivalent basis, total revenue was up 16% to C$3.98 billion from C$3.42 billion in the year-ago quarter.
BNS closed Wednesday's trading at US$47.96 on the NYSE, down US$0.20, on a volume of 454,800 shares.
On the TSX, BNS.TO dropped C$0.30 and ended Wednesday's trading at C$49.12, on a volume of 2.19 million shares.
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