Japanese bank-Mitsubishi UFJ Financial Group, Inc. (also known as MUFG) (MTU) strategizes to buy majority stake in Thailand based-Bank of Ayudhya. MUFG is in talks to acquire 51% stake for approximately ¥400 billion ($4.1 billion). The agreement is expected to be announced in early July.
MUFG planned the acquisition with the target of expanding its operations in Southeast Asia. The bank aims to provide varied financial services to clients and businesses in Thailand. However, regulations in Thailand restrict foreign banks with local branches to provide capital to its banks. Therefore, MUFG will merge its Bangkok branch with Bank of Ayudhya to operate smoothly.
As per the transaction, MUFG will firstly acquire 25% stake which General Electric Company (GE) holds in Bank of Ayudhya. Following this buyout, MUFG will initiate a tender offer for the remaining shares.
If the transaction is announced as per schedule, this would stand out as the largest acquisition in Asia by a Japanese bank. Moreover, it would be the second largest deal for MUFG, the first being the ¥900 billion investment in Morgan Stanley (MS), a US investment bank, in 2008.
Currently, Bank of Ayudhya holds assets worth ¥3.4 trillion. Therefore, MUFG's lending balance is expected to catapult 350% through the acquisition of Bank of Ayudhya.
Through its major subsidiaries and affiliated companies, MUFG engages in a broad range of domestic and international financial operations, including commercial banking, investment banking, trust banking and asset management services, securities businesses, credit card businesses, and provides related services to individual and corporate customers. Therefore, this deal would help strengthen Asian operations of MUFG.
Currently, MUFG carries a Zacks Rank #1 (Strong Buy). Other foreign banks that are worth considering include Sumitomo Mitsui Financial Group Inc. (SMFG) with a Zacks Rank #1.
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