TPG buys control of Sri Lankan bank

TPG will buy a combination of primary and secondary shares representing up to 70% of UBC's issued share capital, plus warrants that would increase its stake to 75% if exercised within six years. The transaction will strengthen the bank's tier-one capital, enabling it to meet regulatory targets that come into effect in 2016.

"Together with Union Bank, we are well placed to seize opportunities in the local market and develop a strong retail bank franchise. We see great growth potential for Union Bank and aim to see it emerge as one of the top five commercial banks in the country," Puneet Bhatia, partner and India country head at TPG, said in a statement.

Tim Dattels, managing partner and co-head of Asia at TPG, said the PE firm has been encouraged by Sri Lanka's growth momentum - the IMF expects GDP to expand by 7% in 2014, making it one of the fastest-growing economies in the region - and policies to enhance the banking sector.

Established in 1995, UBC has a network of 60 branches and focuses on lending to small and medium-sized enterprises. The company listed on the Colombo Stock Exchange in 2011. As of March 2014, it had total assets of LKR36.8 billion ($282.6 million) and total equity of LKR5.5 billion.

TPG has a strong track record in financial services, particularly in emerging markets. In the past decade it has secured strong full and partial exits from the likes of Korea First Bank, Shenzhen Development Bank in China, and Indonesia's Bank Tabungan Pensiunan Nasional (BTPN). It had invested $2.3 billion in 13 financial services companies in Asia as of year-end 2013.

According to AVCJ Research, private equity investment in Sri Lanka over the last 10 years totals less than $300 million. The largest transaction on record during this period - by a considerable margin - is Khazanah Nasional's purchase of a minority stake in locally-based conglomerate John Keells Holding for $121.6 million in 2012. The same year Standard Chartered Private Equity committed $40 million to Abans, a domestic consumer electronics retailer.

TPG's investment in UBC was approved by the Central Bank of Sri Lanka on August 6. Following the private placement of primary shares, the private equity firm - acting through an affiliate called Culture Financial Holdings - will make an offer to holders of secondary shares. The deal also requires certain shareholder and regulatory approvals.

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• Topics
• Financials
• Buyouts
• South Asia
• TPG Capital
• Financial Services
• buyout
• Sri Lanka