Thailand's sixth-largest commercial bank, BankThai, will receive more than Bt3 billion from selling new shares to a new strategic investor, US-based TPG Newbridge, and other investors at Bt4.17 apiece, a discount on the market price of the bank's stock.

The bank's board of directors has approved an offer of 556.22 million new shares, amounting to 24.99 per cent of BankThai's total paid-up capital, to Newbridge Asia IV LP, or the TPG Newbridge Group (TPGN).

The price is Bt4.17 a share, for a total value of almost Bt2.32 billion, BankThai said in a statement to the Stock Exchange of Thailand. The bank's new shares will be issued at a price higher than the book value of Bt3.90 each but below the market price, which was Bt4.26 at yesterday's close of trading, down 1.84 per cent.

As well, the bank has concluded an offer of 175.22 million new shares, representing a 7.9-per-cent stake, to other investors at Bt4.17 apiece, for a total value of almost Bt730.67 million.

The bank's newly offered shares will comprise two tranches, with a combined value of about Bt3.05 billion.

BankThai recently signed a subscription agreement with TPG Newbridge, under which the US private fund undertook to buy 24.99 per cent of bank through an issue of new shares.

Before details of the deals were fixed, BankThai's shareholders approved an increase in the bank's registered capital, from Bt52 billion to Bt61.4 billion, through the issue 940 million new shares at a par value of Bt10 each.

BankThai president Phirasilp Supapholsiri said, "BankThai is pleased to have found an ideal partner in TPG, which we think will assist us tremendously in achieving our long-term goal of becoming a strong independent Thai bank."

However, Globex Securities deputy managing director Warut Siwasariyanon said the deal would not deliver significant benefits to the small bank, because TPG Newbridge - the new strategic investor - would not contribute banking know-how to BankThai's operations. Its main contribution will be funds, and it will be unable to assist in either lending or network expansion.

This makes the BankThai deal different from, for example, that involving Bank of Ayudhya and GE Capital, said Warut. TPG Newbridge's investment will offer BankThai no advantages in the current environment of greater competition in the banking sector.

"[BankThai] will still be a target for takeover. As it has disadvantages in terms of business potential, it is still possible the bank will be consolidated with other financial institutions. If this assumption proves [to be] true, TPG Newbridge might exit from [its arrangement with] the local bank," he said.

Following the transaction, the Financial Institutions Development Fund (FIDF) will continue to be BankThai's largest shareholder, with a 32.89-per-cent stake, while TPGN will own 24.99 per cent.

However, Phirasilp said the bank would increase capital again mid-year by 2.2 billion shares via a rights issue. He said the FIDF would like to invest in the rights issue, in order to maintain its shareholding in the bank. Of the total 940 million registered shares approved earlier at a shareholders' meeting, 731 million will be allocated to TPG and other investors.

TPG Newbridge is the Asian investment arm of the Texas Pacific Group, one of the world's leading private-equity firms. TPG manages more than US$5 billion (Bt176 billion) in capital around the world.

Somruedi Banchongduang

The Nation