Bangkok Bank to buy Indonesian lender for $2.7 billion in overseas expansion

BANGKOK (Reuters) - Bangkok Bank Pcl BBL.BK, Thailand's third-largest lender by assets, said on Thursday it had agreed to buy an 89.1% stake in Indonesia's PT Bank Permata BNLI.JK for about $2.7 billion, in the first major overseas acquisition for a Thai bank.

FILE PHOTO: The logo of Bangkok Bank is pictured at a bank headquarters in Bangkok May 26, 2016. REUTERS/Jorge Silva/File Photo

Standard Chartered STAN.L and Indonesian conglomerate PT Astra International ASII.JK jointly controlled Permata, each owning 44.56% in the bank that operates about 330 branches across 62 cities in Southeast Asia's biggest economy.

Asia-focused lender StanChart said in a separate statement that it would receive about $1.3 billion from the divestment of its Permata stake, which, it said, was an important part of the bank’s “capital optimization” plans.

Bangkok Bank’s overseas expansion with the acquisition of Permata comes as the Thai economy this year is expected to post its slowest expansion in nearly five years, with banks’ fee income coming under pressure.

“The Indonesian economy has good potential ... it has a good prospect over the next 20 years,” Chartsiri Sophonpanich, President of Bangkok Bank told Reuters.

Banking sector consolidation in Asia is expected to pick up as economic growth across the region slows and the lenders grapple with thinning margins, worsening asset quality and rising costs, consultancy McKinsey said in a report this year.

In the case of Bangkok Bank “it is partly to follow its corporate clients, many Thai corporates are investing in Indonesia or looking at Indonesia,” said Maria Lapiz, head of institutional research at Maybank Kim Eng Securities Thailand.

The transaction values Permata at 1.77 times its book and indicates a purchase price of 1,498 Indonesian rupiah ($0.11) per share. Ahead of the deal’s announcement Permata shares ended up 4.4% at 1,310 rupiah, the Thai lender said.

The deal is expected to close in 2020.

Bangkok Bank expects to launch a mandatory tender offer for the remaining 10.9% stake in Permata at the same purchase price after completing the transaction to acquire the stakes from StanChart and Astra, it said.

Takeover interest in Permata gained ground this year after StanChart said in February its investment in the bank was no longer core, signaling it was open to selling its stake. Permata shares have more than doubled so far this year.

Permata, the 12th largest bank in Indonesia by total assets, has $7.6 billion in loans and $8.5 billion in deposits as of the end of September.

Bangkok Bank’s acquisition, which will be funded by existing cash and financing, is likely to be accretive to its earnings per share and return on equity immediately post completion, it said in the statement.

StanChart shares were trading up 2.3% in London on Thursday after the announcement.

“The sale of our stake in Permata will allow us to focus on our wholly-owned business ... and will release capital for reinvestment or return to shareholders,” StanChart Chief Executive Bill Winters said in a statement.

Reporting by Chayut Setboonsarng; Additional reporting by Panu Wongcha-um; Writing by Sumeet Chatterjee; Editing by Raju Gopalakrishnan and David Evans