By Taiga Uranaka and Denny Thomas
TOKYO/HONG KONG (Reuters) - Japan's Mitsubishi UFJ Financial Group (MUFG) has agreed to buy a controlling stake in Thailand's Bank of Ayudhya Pcl for up to 560 billion yen ($5.61 billion) as Japanese lenders expand into fast-growing Southeast Asian economies to beat slower growth at home.
MUFG's purchase of up to 75 percent of Thailand's fifth largest lender would be the biggest acquisition by a Japanese bank in Southeast Asia. It also ends General Electric Co's six-year-old investment in Ayudhya, with GE raising $2.41 billion by selling its stake in the Thai bank in two tranches.
The deal requires approval from Thailand's finance ministry as foreign ownership in domestic banks is capped at 49 percent. MUFG told a briefing it believes Bangkok would "take a favorable view" and said it was considering merging its Thai operations with Ayudhya to comply with Thailand's single presence policy on bank ownership.
MUFG has sizable operations in Japanese corporations in Thailand, where Toyota Motor Corp and other conglomerates own manufacturing plants.
Under the terms of the deal, MUFG will make a tender offer priced at 39 baht per share, allowing GE to sell its entire 25.33 percent stake in the Thai bank. Thailand's Ratanarak Group, which founded the bank in 1945, has agreed to retain a 25 percent stake in Ayudhya.
MUFG is paying a price-to-book ratio of 2.02 times for March 2013, which represents a 46 percent premium to the average P/B ratio of Thai banks, according to Thomson Reuters data.
The tender offer is expected to start in early November and end in December, the statement added.
GE's sale of its stake in Ayudhya is being closely watched by ING , which is also preparing to offload its 31 percent stake in Thai lender TMB Bank plc .
APPETITE FOR SOUTHEAST ASIA
MUFG's acquisition of Ayudhya comes less than two months after rival Sumitomo Mitsui Financial Group's bought a $1.5 billion stake in Indonesia's Bank Tabungan Pensiunan Nasional Tbk PT .
Japanese banks and insurers have this year launched deals worth $8.15 billion in Southeast Asia, attracted by the region's strong growth prospects, but their operations have been mostly limited to corporate banking. MUFG's acquisition of Ayudhya marks its first foray into Asian retail banking outside Japan.
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 for $466 million in September.
MUFG was one of several bidders for GE's stake, but sources said the Japanese lender was the most aggressive and had also won the support of the Ratanarak Group.
Morgan Stanley advised GE, while Bank of America Merrill Lynch advised MUFG, sources told Reuters. ($1= 99.7450 Japanese yen)
(Additional reporting by Khettiya Jittapong; Editing by Miral Fahmy)