(Corrects structure of stake in pargraph 2, title in paragraph
4, date in paragraph 7)
By Shihar Aneez and Stephen Aldred
COLOMBO/HONG KONG Aug 14 TPG Capital Management
LP has agreed to buy a majority stake in Sri Lanka's Union Bank
of Colombo PLC (UBC) for $113 million in the country's
biggest buyout deal.
TPG, via its affiliate Culture Financial Holdings Ltd, will
take a stake of up to 75 percent in Union Bank through a
combination of primary and secondary shares and warrants, the
bank and the fund said on Thursday.
Sri Lanka's government is keen to develop the banking sector
to support growth in an economy which is emerging from the
trauma of a protracted civil war. The economy is expected to
growth 7.8 percent this year, faster than last year's 7.2
Puneet Bhatia, a partner and TPG's India country head, told
Reuters the private equity fund hopes to turn Union Bank into
one of Sri Lanka's top five banks.
Union Bank is the eighth-largest of Sri Lanka's 12 listed
banks and has a market capitalisation of around $67 million,
according to Thomson Reuters data.
"Our experience with banks in Asia shows that a small,
community-based lender can create a very strong financial
institution," said Bhatia.
The buyout will boost Union Bank's Tier 1 capital, a measure
of its financial strength, to enable it to meet the central
bank's minimum capital requirement of 10 billion rupees ($76.8
million) before a Jan. 1, 2016 deadline.
The returns made from relatively small investments in banks
in emerging markets can be substantial for private equity funds.
Last year, TPG sold part of its stake in Indonesia's Bank
Tabungan Pensiunan Nasional Tbk PT to Japan's Sumitomo
Mitsui Banking Corp, putting it on course to earn more than 10
times its initial investment made in 2008.
($1 = 130.1800 Sri Lankan rupees)
(Reporting by Shihar Aneez in COLOMBO and Stephen Aldred in
HONG KONG; Editing by Denny Thomas and Matt Driskill)