The Finance Ministry is set to spend 10 billion baht to subscribe to TMB Bank's newly issued shares to maintain its shareholding in the new bank from the amalgamation of TMB and Thanachart Bank (TBank).
The funds for the new shares will come from divestment of some of its stake in the state-run Vayupak Fund and the ministry's internal funding, said Finance Minister Apisak Tantivorawong.
Buying TMB's rights offering shares is estimated to cut the ministry's investment cost in the bank to about 3 baht a share from 3.80 baht, he said.
However, the ministry's shareholding in the integrated bank could be diluted because TMB must earmark a portion of newly issued shares to Thanachart Capital (TCAP), a holding firm of TBank, Mr Apisak said. The ministry will ask to exercise full rights in the recapitalisation.
How much of the newly issued shares will be offered to the ministry depends on due diligence, he said.
The ministry holds a 25.9% stake in TMB, and Dutch bank ING has a 25% stake. TCAP holds a 51% stake in TBank, and Canada's Bank of Nova Scotia (Scotiabank) owns the remainder.
Upon the completion of the consolidation process, the three new major shareholders -- TCAP, ING and the Finance Ministry -- will each hold at least 20% of the integrated bank, while Scotiabank will hold a significantly smaller stake before exiting later.
TMB recently entered into a non-binding memorandum of understanding to consolidate with TBank through an entire business transfer with an estimated transaction value of 130-140 billion baht, forming the country's sixth-largest bank by assets, worth 1.9 trillion baht.
The amalgamation is expected to be completed by year-end.
Under the plan, TMB will finance the transaction via a combination of debt and equity financing. Equity financing is expected to account for 70% of the transaction value.
TMB will allocate newly issued shares worth 50-55 billion baht to TCAP and Scotiabank -- both TBank shareholders -- at a price of 1.1 times TMB's latest book value, and a further 40-45 billion baht worth of newly issued shares to major shareholders.
Mr Apisak said the Finance Ministry should subscribe to TMB's newly issued shares, given that returns from the consolidated bank would increase as the larger bank would have economies of scale and higher efficiency.
TMB shares closed on the SET at 2.28 baht on Thursday, down four satang, in trade worth 482.8 million baht.
