GE begins BAY divestment with 7.6% sell-off

GE Group has sought help from Morgan Stanley to find a buyer for its remaining 25.33-per-cent stake in Thailand’s fifth-largest bank, after unloading 7.6 per cent yesterday in a big-lot transaction. The name of the buyer was unavailable.
Malayan Banking (Maybank) has reportedly been the most potential suitor, but also appearing on the suitor list is New Zealand Banking Group.
GE Group’s remaining stake in BAY is at a level that would facilitate a share sale to a strategic investor.
The group said it would not further sell BAY shares in the next 180 days, “except for any strategic sale of substantially all of GE Group’s shares in the bank, or as may be agreed with Morgan Stanley”.
Under Thai rules, the purchaser of a stake lower than 25 per cent is not required to launch a mandatory tender offer.
“We still don’t know who bought the 7.6-per-cent stake,” an analyst at an international brokerage company told The Nation in a telephone interview.
He did not think that Maybank, the largest financial services group in Malaysia, had done so as the bank would have wanted a bigger stake in BAY.
“GE Group could have done that [sold the small stake] to facilitate a further sale, as the buyer [of a stake below 25 per cent] would not need to launch a mandatory tender offer,” he added.
If Maybank were to buy GE’s remaining shares in BAY, it would become the largest shareholder, with the Ratanarak Group second with a 24-per-cent holding in the bank.
Malaysian groups eye Thailand There were rumours last year that Malaysian financial groups like Maybank and RHB Capital had been looking for good investment choices in Thailand in a bid to broaden their business ahead of the Asean Economic Community coming into effect in 2015.
BAY has been one of the hot targets, because of its strong expertise in retail banking. Both Maybank and RHB want retail-banking interests in Thailand because the groups have expertise in investment banking, while retail banking provides higher returns.
“If Maybank emerges as the biggest shareholder, BAY’s core business should be unchanged because Maybank is also strong in retail banking,” said the analyst.
Maybank acquired Kim Eng Holdings last year, which allowed it to enter the Thai securities industry through Maybank Kim Eng Securities (Thailand).
Montree Sornpaisarn, chief of the local securities firm, said yesterday that Maybank had not bought the 7.6-per-cent stake in BAY, but the bank maintains its interest in the institution under a plan to expand its Asean exposure.
Bank of Thailand Governor Prasarn Trairatvorakul said yesterday that he had not yet been informed about the change in BAY’s shareholding structure.
He acknowledged that banks in Asian countries, Australia and New Zealand had long desired to establish a presence in Thailand. However, without new bank licences, the only way they could do so is to acquire a stake in existing banks.
Aside from BAY, TMB Bank may also face a shareholding change soon, as its largest shareholder – the Netherlands’ ING Bank, which holds 25.19 per cent – is looking for a buyer.
Meanwhile, purchasing 2 billion shares in BAY in 2007 at Bt16 apiece and selling 461.6 million shares for Bt31.30 apiece, GE Group yesterday netted Bt7.38 billion, or a 100-per-cent capital gain.
“BAY is very strong and the stock has performed well; many investors would like to participate in the bank’s growth. We think it is timely to partially reduce our holdings while still giving us strategic options for our remaining approximately 25-per-cent stake,” said a GE Capital spokesperson.

BROKERAGES REMAIN BULLISH
Both Asia Plus Securities and Kiatnakin Securities remain bullish on BAY, despite the shareholding change.
“BAY has acquired all retail business and expertise in the area from GE. We also believe that the new strategic partner would help it strengthen in corporate banking, trade finance and cash management,” Asia Plus said in a research note.
For Kiatnakin, BAY is outstanding in terms of retail business, which accounts for 48 per cent of its loan portfolio. This allows it to maintain a net interest margin at 4.5 per cent, higher than the industry average of 3.1 per cent.
Investors were, however, surprised yesterday that GE had sold the shares at below the market price.
BAY hit Bt36.50 on September 19 following the announcement of the GE Group’s plan to sell shares. Concern over the shareholding change subsequently led to a plunge in BAY’s share price, though.
The stock dropped as much as 8.3 per cent yesterday, heading for its biggest decline since September 26, 2011, before closing the day’s trading down 7.5 per cent at Bt30.75.