Toronto-based Bank of Nova Scotia agreed to reduce its stake in Thailand-based Thanachart Bank PCL in exchange for cash and shares in another Thai lender, TMB Bank PCL.
The Canadian lender currently owns a 49% stake in Thanachart Bank, according to a news release. The two Thai banks in February signed a nonbinding agreement to merge, and total consideration is expected to be about 130 billion baht to 140 billion baht, with TMB Bank agreeing to finance the deal through a combination of debt and equity.
ING Groep NV also entered into a separate agreement in relation with the deal. Upon completion, ING is set to be a major shareholder in the combined company, together with Thailand's Ministry of Finance and Thanachart Bank parent Thanachart Capital PCL. The Netherlands-based bank currently owns a 25% stake in TMB Bank. ING and Thanachart Capital will hold stakes of above 20% each upon completion of the transaction.
Scotiabank said it will own roughly 6% of the combined company, and it will retain a 49% stake in two Thanachart Bank subsidiaries expected to be sold in 2020. The deal is expected to close in the first quarter of 2020.
Scotiabank expects to record an after-tax gain of about C$300 million in its other segment and an increase in its common equity Tier 1 ratio by about 25 basis points after closing. It also expects to record an additional gain in the sale of the two Thanachart Bank subsidiaries.
The merger of Thanachart Bank and TMB Bank would create Thailand's sixth-largest commercial bank by assets, with total assets of 1.938 trillion baht and total net loans of 1.383 trillion baht, on a pro forma basis, according to S&P Global Market Intelligence data.
As of Aug. 7, US$1 was equivalent to 30.81 Thai baht.