Union Bank gets shareholder support for TPG investment

Friday, 19 September 2014 00:18 - - {{hitsCtrl.values.hits}}

Union Bank of Colombo PLC (UBC) held its Extraordinary General Meeting on 17 September, facilitating shareholder approval for the conclusion of its landmark investment agreement of $ 117 m with TPG, a leading global investment firm. Union Bank Chairman Alex Lovell stated that the bank received an overwhelming endorsement from shareholders for the TPG investment. As per the circular to shareholders issued by UBC, the resolutions passed in summery included (1) the issue of 742,156,249 ordinary voting shares of the company for Rs. 15.30 each to Culture Financial Holdings Ltd. (CFHL) by way of a private placement; (2) The issue of 218,281,250 warrants to CFHL for Rs. 0.30 per warrant conferring the right to subscribe to one new ordinary voting share per Warrant at any time within a period of six months at a consideration of Rs. 16 per ordinary voting share; 742,156,249 ordinary voting shares to be issued to CFHL by way of the private placement without offering such ordinary voting shares to the holders of the existing ordinary voting shares of the Company; and (4) Articles of Association of the company be amended to reflect provisions of the investment agreement. The investment, one of the largest Foreign Direct Investments to Sri Lanka in the recent years, now places Union Bank amongst the top five private banks in equity and dominates in the second position in stated capital amongst all banks in Sri Lanka. It further aligns UBC to the Central Bank road map on consolidation in the banking and non -bank financial institution sectors. Marking this milestone investment to the financial services industry in Sri Lanka and to Union Bank in particular, David Bonderman, Founding Partner of TPG is currently in Sri Lanka. Lovell further stated that the investment agreement would leverage highlighted benefits to Union Bank, its subsidiaries and the shareholders. It would ensure strong capital support with the Central Bank Road Map anticipating the increase of capital in licensed commercial banks to a minimum of Rs. 10 billion in the next two years. Further, it enables Union Bank to harness the benefits of a global partnership with an entity which has over $ 66 b in assets under management, its value-added approach and its extensive experience with global public and private investments. The investment will ensure rerating of Union Bank’s credit profile enabling the bank to access longer term, low cost funding. In addition to the capital injection, TPG will invest in strengthening the bank’s risk management to allow for scalability over TPG’s investment. Union Bank will further benefit with the introduction of new products, both in terms of assets and liabilities, to enhance the profitability. The bank will also see elevated focus in network expansion supported by enhanced ATM penetration which will facilitate better service and convenience to customers. Further, a larger market cap bank would provide for greater institutional investor participation.