TPG signs $117m Sri Lanka debut

Global private equity firm TPG has made its first investment in Sri Lanka, buying into local bank Union Bank of Colombo.

The firm has agreed to acquire a 70 percent stake in the business for $117 million through a combination of primary and secondary shares, according to a statement. TPG can extend its holding to 75 percent after six years.

The Central Bank of Sri Lanka approved the deal last week, but it is still subject to certain conditions including shareholder approval.

“We are pleased to partner with Union Bank. As a strategic and first-time investor in Sri Lanka, we are very encouraged by the country’s economic growth momentum and the Central Bank’s policy initiatives to enhance the country’s banking sector,” Tim Dattels, managing partner and TPG’s Asia co-head, said.

Puneet Bhatia, partner and TPG’s head of India added, “Together with Union Bank, we are well placed to seize opportunities in the local market and develop a strong retail bank franchise. We see great growth potential for Union Bank and aim to see it emerge as one of the top five commercial banks in the country.”

UBC is one of Sri Lanka’s commercial banks focusing on small and medium enterprise and has about 60 branches covering all districts and provinces in the country.

TPG has been active in Asia’s financial services sector, having invested about $2.3 billion in 13 related companies in Asia as of December 2013.

The firm had particular success as an early investor in Indonesia, acquiring domestic commercial bank Bank Tabungan Pensiunan Nasional (BTPN) with its local partner Northstar Group for about $200 million in 2007, Private Equity International reported earlier.

In May last year, the firm agreed to sell 40 percent of BTPN over two tranches to Japan’s Sumitomo Mitsui Banking Corporation for about $1.52 billion, standing to gain around 7x on its original investment.