Opus Dei – ABN Amro Bank kupuje Thai Bank


By Thomas Crampton

Published: March 19, 1998

BANGKOK— The Dutch banking giant ABN-AMRO Holding NV, exploring a new model for buying into Asia’s troubled economies, said Wednesday that it would purchase Thailand’s 11th largest commercial bank, the Bank of Asia, on a buy-now, set-the-price-later plan.

In Seoul, meanwhile, the German industrial giant BASF AG said it would pay $600 million for a division of Daesang Group, the biggest sale by a South Korean conglomerate since Asia’s economic crisis began in July.

The two deals were a fresh sign that the sale of Asia’s discounted assets may have begun in earnest. They follow a recent slew of big Asian commitments by investors including Prince Walid ibn Talal of Saudi Arabia, the financier George Soros and Michael Jackson.

ABN-AMRO said it had agreed to buy a majority stake in the Bank of Asia, but it would adjust the price later according to the value of the bank in two years.

„Basically the deal is a case of buy now and pay now, but adjust the price later when conditions are more normal,” said Ton de Boer, chief executive of ABN-AMRO Asia-Pacific Pte.

„The last time ABN-AMRO used a similar formula was in South America during the debt crisis, and I believe this is the first time it has ever been used in Asia by anyone buying a bank,” Mr. de Boer added.

This style of investment, which allows the buyer and seller to conclude a deal without actually agreeing on a final price, may gain wider acceptance as investors search for deals in Asia, analysts said.

Despite sharp falls in regional currencies, Asian owners have kept the price of their companies relatively high, while foreign investors remain reluctant to convert money into extremely volatile currencies.

Other deals in the last few days include China Development Corp. of Taiwan spending $15 million to buy a 59 percent stake in a unit of Bangkok Bank PCL. Meanwhile, American International Group Inc. announced plans for a $1 billion fund to invest in troubled Asian companies.

In preparation for a possible deal, Thailand’s second-largest bank, Thai Farmer’s Bank, announced Wednesday it would amend its articles of association to allow up to 49 percent foreign ownership.

Pending completion of due diligence, ABN-AMRO will pay 7.5 billion baht ($187.3 million) for newly issued shares representing 75 percent of the Bank of Asia’s enlarged capital.

But in order to allow a „fair valuation” of the Thai bank during calmer economic conditions, it was agreed that the Dutch bank would also pay a second installment in two years.

The amount of the second installment will calculated by an independent auditor using a formula the two sides have agreed.

Prime concerns preventing a fair valuation of the bank now, Mr. de Boer said, were currency volatility, the unknown number of non-performing loans and the general crisis environment affecting much of Asia.

After the dollar soared from 25 baht in July to beyond 50 baht in January, it has recently retreated to about 40 baht. This volatility, combined with plunging stock values and deteriorating economic conditions, has made it hard to estimate how many of Thailand’s heavily indebted companies will be able to repay their outstanding loans.

„In these conditions, an assessment of the fair value of the bank is extremely difficult,” Mr. de Boer said. „It is also a great carrot for management. I will be very happy to pay a great deal in the second tranche because it means the bank is doing well and Thailand’s economy is recovering.”

The practice of setting a price but adjusting it later has been long used in developed economies, especially when companies have unknown liabilities or assets, such as an outstanding lawsuit or an unproved product with tremendous potential.

But it is extremely rare in Asia for deals to be left open-ended, because local banks have little experience with such forms of financing, and foreign investors fear items may be hidden off the balance sheet.

„This is an unusual and creative deal, but there is a lot of individual trust involved,” said one foreign banker based in Thailand.

„In our experience, you can never define all the possible scenarios two or three years down the road. We don’t like to be forced into arbitration, so we like to close deals completely.”