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Published on November 9, 2007

The Netherlands-based ING Bank narrowly won out over the unexpected bidders on Wednesday, while for two days the circumstances twisted and turned every hour.

It was not until Tuesday that DBS Group Holdings made a surprise move by joining Germany's Deutsche Bank to bid for a stake in TMB, offering a higher subscription price at Bt1.60 per share than the Bt1.40 offered earlier by ING.

Then the cut-throat bidding started.

No one was more surprised than the Dutch banking group, whose board was preparing a teleconference with the Thai bank's board at 10pm on Tuesday to seal the strategic partnership.

DBS Group, already a major shareholder of TMB, had made it clear that it would not participate in the bank's recapitalisation this time, allowing its stake to be diluted from 16 per cent to 6 per cent once ING bought into TMB.

A source close to events said the Singaporean bank had been reluctant to put more money into TMB. It would like to acquire majority control in the institution, but DBS was uncertain whether it would be able to control a bank in which the military's voice is still strong.

What made DBS change its mind and seek Deutsche Bank's help could be that the price was still cheap despite the higher bidding, and that TMB also has its own strengths despite its weak financial heath.

An analyst at Capital Nomura Securities said the bidding competition for TMB's shares by the two international banks reflected the local bank's attractive share price, though its fundamentals have not been very strong.

"Both share prices of Bt1.40 or Bt1.60 are quite low for the two foreign banks," he said.

The analyst, moreover, said that aside from its branch network, a close relationship with government authorities - especially the Finance Ministry and the Army - also made TMB interesting.

On October 18, ING had initially agreed with TMB to take 25.2 per cent of the loss-maker's stock at Bt1.40 per share. However, TMB or the Finance Ministry - another major shareholder of TMB - could not disclose ING's name to the public as ING's board had yet to approve the deal.

Still, the name of ING had been leaked in the market following the start of the capital-increase process and paperwork.

However, on Tuesday, TMB's board had to put everything on hold as another proposal was offered by another financial institution group. The board then postponed the meeting to Wednesday.

It was reported that DBS, joining with Germany's Deutsche Bank, had bluffed ING into offering Bt1.60 per share for the TMB stake by tabling a bid at that price. That would boost the capital that TMB expected to gain to around Bt38 billion, from the previous plan of Bt35 billion.

On November 7, at 2pm, TMB's board called another meeting. It was told that ING had offered another proposal with a subscription price adjustment up to Bt1.60 per share, equal to the DBS group's proposal.

With more offers and big decisions to make, the bank's board agreed the deal must be concluded by 4.30pm. Therefore, it had about two and a half hours to choose which strategic partner would be the best for the country's sixth-largest bank.

Three financial advisers were invited to the meeting: Phatra Securities, Kim Eng Securities (Thailand) and TMB Macquarie Securities (Thailand).

While the advantages and disadvantages of both bidders were discussed, the board also needed to occasionally consult both DBS and ING by telephone.

Finally, the board decided to choose ING.

Finance Minister Chalongphob Sussangkarn said TMB had chosen ING because it considered the European bank offered greater benefits.

ING is therefore going to be the new partner of TMB, and DBS - according to Chalongphob - will not be against the partnership.

However, the hardships of TMB are not over as many predict more provisioning and losses in the current quarter. But at least the prolonged recapitalisation plan is now complete.

 Analysts point out that TMB will now need to conduct a major operation on its organisational management, financial status and competitiveness. This will take time and cost a good deal.

It remains to be seen how ING Bank will cope with the tough tasks ahead.

Somruedi Banchongduang

 Jiwamol Kanoksilp

 The Nation