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Secrecy marks 3-way merger at high speed

 

SIMILAR to the Finance One/Thai Danu Bank merger, regulators' fingerprints are everywhere in the hastily-arranged merger between Nava Finance and Securities Plc, CMIC Finance and Securities Plc and Thaimex Finance and Securities.

Although the merger of the three financial institutions did not receive a code name, it was executed with the utmost confidentiality. So confidential was it that only a handful of top executives knew what was going on.

On the Nava Finance and Securities' side, Thanong Bhidaya, its chairman and president of the Thai Military Bank; Thanadee Sophonsiri, its executive chairman; and Kittisak Benjarit, its managing director/finance, were probably the only three individuals trying to put together the deal. Scrambling for the merger on the CMIC side were Pao Sarasin, the former police chief and chairman of CMIC and Suthep Wongvorazathe, the CEO.

Apart from the banking regulators, Viroj Nualkhair, CEO of Phatra Thanakit; Ekamol Khiriwat, the former exchange watchdog chief; and Pakkawat Kowitpattanapong, president of Securities One Plc, also played key behind-the-scenes roles in turning the merger into a reality.

In a perfect orchestration last Thursday, the Nava, CMIC and Thaimex executives went over to the Bank of Thailand's headquarters to sign a memorandum of understanding for the merger in the presence of Amnuay Viravan, the finance minister, and Rerngchai Marakanond, the Bank of Thailand's governor. The merger will create a new financial group with a combined Bt140 billion in total assets and a net worth of Bt17 billion.

This deal came only one day after the Bank of Thailand announced a package for mergers between financial institutions in a shake-up of the Thai financial system.

Thaimex was already being considered by Nava for a merger. Earlier in the week, before the abrupt surfacing of CMIC, a broker's report indicated that Thai Military Bank was trying to consolidate its finance and securities subsidiaries. The merger would bring together Nava, Thaimex, Thai Thanakorn Finance Plc, Thanapol Finance and Securities Plc, Thanasap Finance and Securities Plc and Bangkok Asian Finance Co.

At the height of the financial turmoil last month, Thanong of the Thai Military Bank bit the bullet by assuring all the subsidiaries that they would be fully assisted with liquidity support and that none of them would be allowed to go under. It was reported that Thai Thanakorn and Thanapol were particularly cash-strapped while Nava enjoyed a surplus of deposits.

CMIC is 6.89 per cent controlled by the Thai Farmers Bank. Therefore, it is assumed that if CMIC were to run into any liquidity difficulties, Thai Farmers would come to its rescue, although the bank is not famous for its generosity. Thai Farmers declined to help Finance One when the company was running out of cash, although it held almost 7 per cent in the country's largest finance company, forcing Finance One to seek a merger with Thai Danu.

The Finance One/Thai Danu merger was signed at Bank of Thailand headquarters last month, becoming a model for the mergers and acquisitions which would follow. Banking regulators then said the deal must not fail.

Nonetheless, it appears that the Nava/CMIC/Thaimex merger was also aimed at rescuing CMIC. CMIC is known to be in poor financial health. CMIC's non-performing loans are estimated to be at best Bt2.64 billion and at worst Bt13.62 billion. Its total assets are reported to be Bt66.82 billion, according to the Thanapol Finance & Securities' daily report. During this financial crisis, it is safe to assume the ''at worst" figure.

Then was it a CMIC-for-bank-licence deal for Nava? There has been a growing feeling among financiers that their days are numbered and the only way to survive is to obtain a bank licence. By helping out CMIC, Nava stands a good chance of receiving a bank licence from the regulators.

The banking regulators already have two bank licences available which can be given out at any time. This is a golden opportunity for Nava to receive a licence without the risk of running into political snags. Every bank licence requires prior approval from Cabinet. Imagine Chalerm Yoobamrung's crying wolf again when the new bank licences are up for grabs.

 

BY THANONG KHANTHONG

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