Japan's biggest bank, Mitsubishi UFJ Financial Group (8306.T), is among the first round bidders for General Electric's (GE.N) $1.5 billion stake in Thailand's fifth-largest lender, Bank of Ayudhya (BAY.BK), sources told Reuters on Thursday.
Suitors of GE's Thai bank stake are seeking a foothold in one of Asia's fastest growing economies. They are expected to seek full control of the bank, which is also Thailand's No. 1 retail bank with a $5.9 billion market value.
In addition to MUFG, GE received multiple bids last week for its 25.3 percent stake, with second round offers due after December 25, according to sources with direct knowledge of the matter.
One source familiar with the process but not directly involved said Malaysia's No.2 lender, CIMB Group Holdings (CIMB.KL), had also lodged a bid.
Singapore's Oversea-Chinese Banking Corp (OCBC.SI), which was earlier seen as a potential bidder, did not submit a first-round bid, the sources said.
MUFG and CIMB declined to comment.
Any suitor seeking to take control of the bank would have to overcome several hurdles, including a 49 percent cap on foreign ownership and Thailand's single presence policy on bank ownership.
Some private equity firms were initially eyeing the stake, but their interest has cooled, sources said, as regulators may not favor short-term investors entering the country's banking sector.
GE acquired a roughly 33 percent holding in Bank of Ayudhya in 2007, for 22.3 billion baht, or $626 million based on the exchange rate at the time. It recouped most of its investment, when it sold a 7.6 percent stake in the Thai bank for $466 million in September.
GE, which has a market capitalization of $221 billion, has been selling non-core businesses under Chief Executive Jeff Immelt, and the sale of the Thai bank stake is part of the overall restructuring.
The suitors for GE's stake were asked to also present a detailed proposal on how they plan to grow the bank's business, one of the sources said.
The auction is the second major Southeast Asia banking deal this year, after Singapore's DBS Group Holdings' (DBSM.SI) planned $7 billion takeover of Indonesia's Bank Danamon Tbk (BDMN.JK).
Morgan Stanley (MS.N), which is advising GE on the stake sale, declined to comment.
OCBC declined comment. A Singapore-based GE Capital spokesman also declined to comment. The sources declined to be identified because the auction process is not public.
Bank of Ayudhya shares were up 1.7 percent to 30.25 baht.
FOREIGN OWNERSHIP CAP
Foreign banks are keen to consolidate their position in Southeast Asia, where rapid economic growth is boosting credit growth and demand for wealth management products.
But an outright purchase of a Southeast Asian bank is made difficult by foreign ownership limits in place in several countries.
In Thailand, for instance, foreigners are barred from owning more than a 49 percent stake in domestic banks. However, Thai regulators are open to making exceptions based on the merit of individual cases and that is encouraging some foreign banks to eye the GE stake.
The outcome of GE's sale process is being closely watched by ING ING.AS, which is also preparing to offload its 31 percent stake in TMB Bank plc (TMB.BK), which is worth about $786 million.
Thai media speculated that Siam Commercial Bank (SCB.BK), Thailand's third-biggest lender, could be a bidder for Bank of Ayudhya, but earlier this month SCB said it had not held any merger negotiations with GE Capital on Bank of Ayudhya.
Under Thailand's single presence policy, a local bank cannot hold a stake in another bank, which led to speculation that the two banks could be merged.
(Reporting by Taiga Uranaka, Denny Thomas and Saeed Azhar; Editing by Richard Pullin and Michael Flaherty)