Standard Chartered PLC - Acquisition of controlling shareholding of Union Bank Limited

Standard Chartered PLC - Acquisition

Released 15:38 09-Aug-06

STANDARD CHARTERED ACQUISITION OF CONTROLLING

SHAREHOLDING OF UNION BANK

London, 09 August 2006 - Standard Chartered PLC ("Standard Chartered" or the "Bank") announces that its subsidiary company, Standard Chartered Bank (Pakistan) Limited ("SCBP"), has entered into agreements to acquire an 80.86 per cent interest in Union Bank Limited ("Union Bank") for a cash consideration of USD 413 million (the "Acquisition"). The Acquisition is unconditional but before it can be completed, SCBP is obliged, pursuant to Pakistan law, to make a mandatory public offer (the "Tender Offer") for the remaining shares of Union Bank. The Tender Offer is expected to commence on or about 12 August 2006 and is expected to close on or about 1 September 2006 ("Closing"). The Acquisition is expected to complete shortly after Closing.

KEY POINTS

The acquisition of Union Bank will make Standard Chartered the sixth largest bank in Pakistan by market share of assets and will further extend Standard Chartered's business in a high growth market. Standard Chartered currently has a network of 46 branches in 10 cities. Pakistan is an integral part of Standard Chartered's Middle East and Other South Asia strategy and the acquisition will make Pakistan Standard Chartered's tenth largest geography by income.
The Pakistan banking sector has low penetration rates and a growing profit pool that has doubled between 2004 and 2005. Union Bank provides Standard Chartered with a significant opportunity for growth in both Consumer and Wholesale Banking through product innovation and by leveraging Standard Chartered's international network.
Union Bank is the eighth largest bank in Pakistan by market share. It serves approximately 400,000 retail customers through its extensive network of 65 branches in 22 of Pakistan's major cities, and operates a small but growing Wholesale Banking business.
Union Bank has demonstrated an impressive period of growth since its establishment in 1991, particularly in the retail and Small and Medium Enterprise banking market, where it now holds strong market shares in mortgages, credit cards, personal and auto loans. Union Bank benefits from a strong independent local management team with a wealth of experience from leading international banks.
The combined entity of Standard Chartered and Union Bank will deliver economies of scale, a more complete product set, a stronger operating platform and a wider distribution network.
The purchase price is 17.1 times Union Bank's reported after tax earnings in 2005 and 5.6 times its reported net asset value as at 31 March 2006.
The acquisition of Union Bank is expected to be earnings accretive for Standard Chartered in 2006.
Standard Chartered will finance the acquisition and tender offer through internal resources.

Bryan Sanderson, Chairman of Standard Chartered, said:

"Pakistan is a strongly growing country that is integral to Standard Chartered's Middle East and Other South Asia strategy. The acquisition of Union Bank will significantly increase Standard Chartered's presence in this important market."

Mervyn Davies, Group Chief Executive of Standard Chartered, said:

"Standard Chartered is the leading international bank in Pakistan and Union Bank will materially enhance its market position. Union Bank has grown well under its strong management team, and we will drive further growth by adding Standard Chartered's products and processes as we have done successfully in other markets."

Pakistan and Union Bank

Union Bank represents an opportunity for Standard Chartered to extend its existing footprint in Pakistan and obtain a significant presence in a high growth market.

Pakistan has shown real GDP growth of between 5.5 per cent and 8.5 per cent since 2003. Standard Chartered forecasts an average GDP growth in excess of 6 per cent every year for the next five years. Standard Chartered estimates the banking sector profit pool at USD 1,100 million in 2005, having doubled over the last year. The low penetration rates that exist in the sector (loan/GDP ratio of 30 per cent), and the demographic profile, make Pakistan an integral part of Standard Chartered's strategy.

Union Bank is Pakistan's eighth largest bank by market share of assets and has total assets of USD 2 billion. The bank provides Consumer and Wholesale Banking products through its nationwide network of 65 branches in 22 cities, and well developed alternative channels, including call centres, internet and 37 ATMs.

Union Bank is listed on the Lahore, Karachi and Islamabad stock exchanges. The bank has performed strongly, having grown assets from USD 988 million to USD 2,081 million between 2002 and the first quarter of 2006. Union Bank has an extensive customer base with 400,000 retail and SME banking customers, and a small but growing wholesale banking business.

Based on audited local GAAP accounts as at 31 December 2005, Union Bank had

Total assets of USD 2,009 million
Total advances of USD 1,201 million
Net assets of USD 91 million

For the 12 months ended 31 December 2005, Union Bank reported profit before tax of USD 47 million and profit after tax of USD 30 million. For the equivalent period in 2004, Union Bank reported profit before tax of USD 25 million and profit after tax of USD 15 million.

Acquisition Rationale and Benefits

Union Bank has an impressive track record of growth driven by a strong local management team. Standard Chartered will look to further grow Union Bank in ways that will include:

In Consumer Banking: Standard Chartered will introduce its multi-product sales model across Union Bank's network to improve productivity. Standard Chartered will also add Wealth Management, Investments and segments such as Bancassurance and Priority Banking to complement Union Bank's existing Consumer Banking expertise.
In Wholesale Banking: Standard Chartered has a strong Wholesale Banking business in Pakistan and can add significant value through a programme of product introduction and penetration of new customer segments hitherto untapped by Union Bank. This will include expanding the product portfolio, for example Derivatives, Foreign Exchange, Transactional Banking, Trade Finance and Corporate Finance.

The combined entity of Standard Chartered and Union Bank will deliver economies of scale, a more complete product set, a stronger operating platform and a wider distribution network.

Approvals, Implementation and Timetable

Before the Acquisition can be completed, SCBP is obliged, pursuant to Pakistan law, to make the Tender Offer. The Tender Offer is expected to commence on or about 12 August 2006 and is expected to close on or about 1 September 2006. The Acquisition is expected to complete shortly after the closing of the Tender Offer. Further announcements in relation to the Acquisition and the Tender Offer will be made as appropriate.

Note to editors

Standard Chartered - leading the way in Asia, Africa and the Middle East

Standard Chartered PLC is listed on both the London Stock Exchange and the Hong Kong Stock Exchange and is consistently ranked in the top 25 among FTSE-100 companies by market capitalisation.

Standard Chartered has a history of over 150 years in banking and is in many of the world's fastest-growing markets with an extensive global network of over 1,200 branches (including subsidiaries, associates and joint ventures) in over 50 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the Americas.

As one of the world's most international banks, Standard Chartered employs almost 50,000 people, representing over 90 nationalities, worldwide. This diversity lies at the heart of the Bank's values and supports the Bank's growth as the world increasingly becomes one market.

With strong organic growth supported by strategic alliances and acquisitions and driven by its strengths in the balance and diversity of its business, products, geography and people, Standard Chartered is well positioned in the emerging trade corridors of Asia, Africa and the Middle East.

Standard Chartered uniquely derives over 90 per cent of profits from Asia, Africa and the Middle East. Serving both Consumer and Wholesale Banking customers worldwide, the Bank combines deep local knowledge with global capability to offer a wide range of innovative products and services as well as award-winning solutions.

Trusted across its network for its standard of governance and corporate responsibility, Standard Chartered takes a long term view of the consequences of its actions to ensure that the Bank builds a sustainable business through social inclusion, environmental protection and good governance.

Standard Chartered is also committed to all its stakeholders by living its values in its approach towards managing its people, exceeding expectations of its customers, making a difference in communities and working with regulators.

For more information on Standard Chartered, please log on to www.standardchartered.com

For further information, please contact:

Romy Murray, Head of Investor Relations

Tel: (44) 20 7280 7245

Romy.C.Murray@uk.standardchartered.com

Sean Farrell, Head of Media Relations

Tel: (44) 20 7280 7163

Sean.Farrell@uk.standardchartered.com

END

Close window | Back to top