US private equity firm TPG is acquiring up to 75% of Union Bank of Colombo for $117 million. This will be the largest ever buyout in Sri Lanka. As a strategic and first-time investor in Sri Lanka, TPG is very encouraged by the country’s economic growth momentum and the central bank’s policy initiatives to enhance the country’s banking sector, said Tim Dattels, TPG’s Asia co-head. Sri Lanka’s has also allowed TPG to breach the ownership cap in Sri Lankan banks. Investors can only buy 10% of a bank in Sri Lanka according to the Banking Act of 1988. They can buy up to 15% with approval from regulators. TPG is buying up to 75% of UBC. The Texas-headquartered firm has a track record of turning around and growing banks in Asia. It became the first foreign firm to control a Chinese bank since 1949 when it invested in Shenzhen Development Bank. The firm sold its 18% stake in 2010 to Chinese insurer Ping An for around 11 times its original investment. In South Korea TPG cleaned up the Korea First Bank after the 1997 Asian financial crisis and more then doubled its money when it sold the bank onto Standard Chartered in 2005. More recently TPG sold its 40% stake in Indonesia’s Bank Tabungan Pensiunan Nasional to Japan’s Sumitomo Financial Group for $1.56 billion, or 4.5 times book value – one of the highest valuations ever paid for an Asian bank.
