Bank of Ayudhya
Downgrade to Sell on M&A speculation rally SELL
Bank of Ayudhya Plc (BAY)
Event – M&A news. According to Bloomberg, General Electric Co. is considering a sale
of its 33% stake in BAY. GE may contact potential buyers including Malayan Banking
Bhd., said a source who asked not to be identified. GE Capital said in an e-mailed
response to questions from Bloomberg News that it regularly evaluates its strategic
options for investments and in the meantime, it continues to work closely with BAY to
strengthen its business franchise.
Our comment. This is not the first time there has been M&A news for BAY, and is
definitely sentimentally positive to share price as the stock will get the M&A price
premium. If GE does sell its 33% in BAY, it would trigger a tender offer for minority
shareholders. At this time it is far too early to evaluate the impact. As BAY is in a
growth stage brought by GE, we see no need for GE to sell BAY - unless the offer is too
good to pass up. If – and this is a big if – there is an M&A, we would guess a potential
acquisition price of 1.6-2x PBV, translating to Bt30-37. Historical M&A cases for banks
were done at 1.4 -3x PBV.
