BankThai plans to offer 500 million capital-increase shares, representing 24.99 per cent of the total, to the US investment fund. The 500 million shares are part of the bank's total of 940 million shares, issued at Bt10 par value to raise its registered capital from Bt52 billion to Bt61.4 billion.

The source said TPG was conducting due diligence, which was 99.99 per cent finalised. This leaves only setting the share price still pending to clear up the capital-asset pull (CAP) compensation from the Financial Institutions Development Fund (FIDF), BankThai's major shareholder.

The CAP compensation is under a gain/loss sharing and yield maintenance agreement between the bank and the FIDF.

"The issue [CAP compensation]

is one important factor in calculating share price. If this is not cleared up,

we can't set the share price," the source said.

ThaiBank president Phirasilp Subhapholsiri expected the due diligence process to be complete in November, and the share price of the capital increase unlikely to be discounted from the market price. Meanwhile, the bank will benefit from TPG as a prospective foreign strategic partner in terms of technology and know-how, he said.

BankThai stock closed on Friday at Bt6.10.

The source said that once due diligence was completed the process would move on to TPG's investment-committee approval and then the legal and accounting process.

Separately, Bank of Thailand assistant governor and FIDF committee member Phairoj Hengsakul said that if TPG wanted a stake in BankThai greater than offered by the bank it could propose this to the FIDF, which would not buy the bank's new shares via the right issue this time as it had a policy to gradually reduce its holding in commercial banks.

Although TGP will become another key shareholder in BankThai, FIDF will still be the largest shareholder of the bank, he said.

FIDF currently holds a 48.98-per-cent stake in the bank. After BankThai's recapitalisation the fund's shareholding is expected to dilute to around 30 per cent. The stake of another shareholder of the bank, Millea Asia Pte Ltd, will also be diluted from 5 per cent to more than 3 per cent.

Phairoj added that although the country's political environment was stable, FIDF would carefully consider whether to dilute its remaining stake in BankThai. FIDF had planned to sell its shares in BankThai to retail investors, but will now reconsider the timing.

TPG Newbridge, the Asian investment arm of Texas Pacific Group, is an international private equity firm. TPG manages more than US$5 billion (Bt183 billion) of capital around the world and has invested in several industries, including the banking sector.

It has invested in Korea First Bank and Shenzhen Development Bank in China.

There was a report that BankThai would be consolidated to be merged into a local middle-sized bank, Siam City Bank (SCIB). The selection of SCIB's new president will be finalised this week.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation