Canada-based Nova Scotia Bank will acquire more than 24 per cent of Thanachart Bank through a capital increase.

The association with Nova Scotia will help Thanachart as the overseas bank has vast experience in trade finance and corporate loans, a source said.

Thanachart's directors earlier approved the allotment of 400 million new shares taking the registered capital from Bt14.58 billion to Bt18.58 billion.

The sale price to Nova Scotia is not known but sources estimated the deal to be worth Bt7 billion.

Thanachart yesterday asked

the stock exchange to suspend trading of both Thanachart Bank and Thanachart Capital stocks. It said directors of both companies will meet today to consider restructuring and a new strategic partner.

Thanachart Bank was trading at Bt9.50 and Thanachart Capital at Bt12.70 before the suspension.

Thanachart Capital holds 99.36 per cent of Thanachart Bank, according to the exchange.

The source said Nova Scotia opened talks with Thanachart in the last quarter of 2006 and due diligence was completed over the past two months.

Thanachart Capital will restructure by transferring holdings in securities companies, life and non-life insurance companies and mutual funds to prepare for the deal. After the restructuring, Thanachart Capital will hold a sizeable stake in Thanachart Bank while the bank will become a holding company of Thanachart Capital.

The Bank of Thailand is considering the plan.

Nova Scotia has failed in the past to win a controlling stake in a Thai bank.

Another broker said a strategic partner would help Thanachart cope with intense competition. It is a small bank and cannot challenge bigger banks at present, the source said.

An analyst at Capital Nomura Securities said Nova Scotia would strengthen Thanachart in terms of capital and synergy.

Over the past two years, Thanachart Bank has expanded to more than 100 branches.

Nova Scotia will help improve Thanachart Bank's information technology.

The foreign bank will hold less than 25 per cent in Thanachart bank and will not need to make a tender offer. The deal also will not need a special approval from the central bank.

Anoma Srisukkasem,

Siriporn Chanjindamanee

The Nation