Union Bank of Colombo PLC (UBC) together with an International foreign investment Fund will acquire over 98 % of the voting shares of The Finance and Guarantee Company Ltd (TF&G), infusing new capital to resurrect the business at a total investment in excess of RS 1.1 Bn sources said. Subsequent to creating history with its highest oversubscription for an IPO, this latest acquisition places Union Bank in the limelight once again with its focused diversification plans taking positive strides in a short period of time. International Investment Banker, Mr Harish Parameswar, Managing Director of Beacon Advisory, an emerging markets focused advisory and investment firm based in Singapore applauds the acquisition as significant and focused for Union Bank. It is apparent that Union Bank will consolidate and build on the recent acquisitions they have done.
In a statement to the media regarding this significant initiative, Union Bank Chairman Aijta de Zoysa stated that the Bank together with ShoreCap II Limited (SCII) USA, will invest in excess of Rs 1.1 Bio to recapitalize TF&G. He further stated that the acquisition is part of Union Bank's diversification and expansion plan to increase focus and growth in the SME sector and it earmarks yet another stepping stone to further penetrate the Small enterprises segment. The decision was based on the respective stakeholders reaching agreement and obtaining regulatory approval. Subsequent to a comprehensive due diligence of TF&G, our strategic partner ShoreCap expressed willingness to invest in this venture together with Union Bank.
Shorecap II is an international private equity company aiming to provide socially responsible appreciation of capital through investments that enhance the growth and capacity of financial institutions serving micro and small enterprises in developing countries and transitional economies. Shorecap II has raised over $50 million in capital to support the growth of development finance institutions in Asia and Africa and between 2003 and 2008 invested in 15 small business banks and regulated microfinance institutions. Shareholders of SCII include the renowned CDC Group PLC, The European Investment Bank, Finnish Fund of Industrial Corporation, International Finance Corporation (IFC) the Norwegian Microfinance Initiative and the Skoll Foundation.
Mr. De Zoysa also highlighted that with the international accreditation, status and profile of SCII, who's main shareholders include top global financial institutions , it is evident this acquisition highlights positive outlook for both the shareholders as well as all stakeholders of TF&G. Further we are able to leverage a unique value proposition to drive TF&G to greater heights capitalizing on the extensive experience and investment strategies of SCII in underserved markets in the areas of micro lending, deposit mobilization, capital re-structuring, new product development, business planning, risk management and other funding strategies.
Mr. Anil Amarasuriya Director/CEO of UBC said that the new look TF&G company with the backing of Union Bank which is indubitably one of Sri Lankas fastest growing Banks with firm financial stability will be able to restore public confidence in the troubled firm. He further added that the Union Bank Balance Sheet had a positive outcome when stress tested for this acquisition.
When questioned about, whether the company would be capable of holding its own against the strengthening financial services industry in Sri Lanka, Amarasuriya highlighted this would not be an issue. As the parent company, leveraging the many strengths of Union Bank such as shareholder strength, stable financial position, brand image and over 15 years of expertise in delivering advanced financial solutions together with a comprehensive branch network , the new company will benefit greatly to resurrect and forge ahead as a stronger business entity. TF&G does not comprise of any subsidiaries.
Under the previous management the company catered to a broad spectrum of clientele and created substantial goodwill which too will add value to the process. The company deposit base is over rupees 03 Bn with over 50 % of the company's deposits been converted to non voting shares with the consent of depositors, he revealed.
With expertise and a business portfolio covering real estate, leasing, hire purchase, pawning and loans, and 04 branches located in Colombo, Ambalangoda, Negombo and Tissamaharama supported by the rapidly expanding branch network of Union Bank we are confident and assure that we will be able to provide a distinctive value proposition to all its stakeholders.
Mr. Amarasuriya further stated that Union Bank is poised for quantum leap growth through profit as well as branding. Hence its subsidiary companies are being realigned in line with both Macro and Micro developments. "This will make them stand out on their own, while associating the core values of Union Bank, hence inculcating strategic changes to the Corporate Brand through brand extensions such as rebranding of F&G under the Union Bank umbrella is an integral part of the business plan. Union Bank also acquired Sri Lankas premier asset management company National Asset Management Limited in February 2011 and is in the process of launching its range of mutual funds to retails investors through the Bank's branch network.
With this infusion of capital to this new venture, there would be a reconstitution of the board of directors, a board led by Mr. Ajita De Zoysa, eminent business personality and Chairman of Union Bank and a directorate consisting of a unique and diverse combination of local and international professionals and businessmen ideal for a financial services company supported by a very positive economic climate and expected industry growth, the company's future looks very good, he concluded.