Tisco out of bankthai race

Tisco Bank has officially withdrawn from the race to take over BankThai, its chief executive, Pliu Mangkornkanok, said yesterday.

Pliu said in a filing with the Stock Exchange of Thailand that Tisco had informed its financial adviser Phatra Securities of its decision last week.

He did not mention the reason for pulling out of a plan to buy a 42-per-cent stake in BankThai that had been put up for sale by the Financial Institutions Development Fund (FIDF).

Tisco is one of five banks - the others are HSBC, Standard Chartered, CIMB and TPG - that had expressed interest in the

stake.

The FIDF is scheduled to open the bids and consider the offered prices by the end of this month.

A source from the banking industry said all bidders had proposed a low price for the stake,

with some quoting amounts lower than the estimated book value of about Bt0.50 a share as of March

31.

"It seems impossible that the FIDF would sell the shares at such a price, as it had paid more than Bt9 per share during the [1997] financial crisis. It also bought new shares twice, at Bt1.36 and Bt1.38," he said.

"The fund would be shouldering a huge loss if it decided to sell below book value, and who would be responsible for the loss?"

BankThai suffered a net loss of Bt2 billion in the first quarter.

It also recorded losses last year and in 2006 of Bt6.93 billion and Bt4.42 billion, respectively.

"It's likely the fund will not sell the bank but merge it with Siam City Bank. This should minimise losses," the source added.

FIDF manager Thongurai Linpiti earlier said if the offers were not attractive, the fund could call for a new round of bidding.

An analyst from Kim Eng Securities said Tisco had probably withdrawn from the bidding as it failed to reach a "compromise price".

There was a high possibility Tisco would have won the bidding, as the FIDF prefers to sell BankThai to a local bank, the analyst said.

He said that historically, the acquisition cost of Thai banks had been 1.01 times higher than book value. At a book value of Bt0.73 at the end of last year, the BankThai price should be about Bt0.80.

"The offered price should not exceed Bt1.32 a share, which is 1.5-1.8 times book value. But even with a new shareholder, BankThai was not expected enjoy a better outlook as it is seen as holding high-risk assets," he added.

Seamico Securities said Tisco's decision was a prudent one.

The brokerage said it would advise investors to resume buying Tisco stock, as the bank does not need to spend Bt2.10-Bt2.20 per share for BankThai, as reported, given its official exit from the bidding.

Earlier Seamico recommended "sell" for Tisco stock when the firm was bidding for the stake.

As the price it could be paying was about three times higher than BankThai's book value, or about Bt15 billion in total, Seamico feared the move would also bring "unclear benefits" to the buyer.

It also earlier said Tisco might need to raise capital to finance the purchase.