Union Bank of Colombo PLC (UBC) held its extraordinary general meeting on September 17, facilitating shareholder approval for the conclusion of its landmark investment agreement of US$ 117 million with TPG, a leading global investment firm.
UBC Chairman Alex Lovell stated that the bank received an overwhelming endorsement from shareholders for the TPG investment.
As per the circular to shareholders issued by UBC, the resolutions passed in summery included the issue of 742,156,249 ordinary voting shares of the company for Rs.15.30 each to Culture Financial Holdings Ltd (CFHL) by way of a private placement.
Another resolution was passed to issue of 218,281,250 warrants to CFHL for Rs.0.30 per warrant conferring the right to subscribe to one new ordinary voting share per warrant at any time within a period of six at a consideration of Rs.16 per ordinary voting share.
Also, 742,156,249 ordinary voting shares will be issued to CFHL by way of the private placement without offering such ordinary voting shares to the holders of the existing ordinary voting shares of the Company.
The investment will ensure rerating of Union Bank’s credit profile enabling the Bank to access longer term, low cost funding. In addition to the capital injection, TPG will invest in strengthening the Bank’s risk management to allow for scalability over TPG’s investment.
Union Bank will further benefit with the introduction of new products, both in terms of assets and liabilities, to enhance the profitability.
The Bank will also see elevated focus in network expansion supported by enhanced ATM penetration which will facilitate better service and convenience to customers. Further, a larger market cap bank would provide for greater institutional investor participation.
It was also decided to amend the Articles of Association of the company to reflect provisions of the investment agreement.
The investment, one of the largest foreign direct investments to Sri Lanka in the recent years, now places UBC amongst the top five private banks in equity and dominates in the second position in stated capital amongst all Banks in Sri Lanka.
It further aligns UBC to the Central Bank road map on consolidation in the banking and non -bank financial institution sectors. Marking this milestone investment to the financial services industry in Sri Lanka and to Union Bank in particular, TPG Founding Partner David Bonderman is currently in Sri Lanka.
Lovell, further stated that the investment agreement would leverage highlighted benefits to UBC, its subsidiaries and the shareholders. It would ensure strong capital support with The Central Bank Road Map anticipating the increase of capital in licensed commercial banks to a minimum of Rs. 10 billion in the next two years.
Further, it enables Union Bank to harness the benefits of a global partnership with an entity which has over US$ 66 billion in assets under management, its value-added
approach and its extensive experience with global public and private investments.