Union Bank, ShoreCap pump Rs. 1.1 b to revitalise The Finance and Guarantee

Union Bank of Colombo PLC (UBC) together with ShoreCap II Limited of USA, an International foreign investment Fund, has acquired over 98% of the voting shares of The Finance and Guarantee Company Ltd. (TF&G), infusing Rs. 1.1 billion in new capital to resurrect one of Sri Lanka’s oldest finance companies.

Previously Union Bank acquired National Asset Management Limited (NAMAL) Sri Lanka’s pioneering Asset Management Company in February 2011. The latest acquisition further highlights Union Bank’s focused diversification plans taking positive strides in a short period of time.

In a statement to the media regarding this significant initiative and yet another new beginning for one of Sri Lanka’s fastest growing banks, Union Bank Chairman Ajita De Zoysa stated that the Bank together with ShoreCap invested in excess of Rs. 1.1 b to recapitalise TF&G established in 1961 and subsequently taken over by The Finance Company in the 1980s. Significant investments were made by both parties with Union Bank investing Rs. 600 million (for 81.27% stake) and its strategic partner ShoreCap investing Rs. 550 million (for 18.63% stake).

De Zoysa further stated that the acquisition is part of Union Bank’s diversification and expansion plan to increase focus and growth in the Small and Medium Enterprises (SME) sector and it earmarks yet another stepping stone to further penetrate the Small enterprises segment. The newly-revived TF&G with the backing of Union Bank which is of firm financial stability will restore public confidence.

As a pioneering finance company with a heritage of over 50 years, TF&G catered to a broad spectrum of clientele and created substantial goodwill which adds value to the acquisition. The company deposit base is over Rs. 3 b with over 50 % of the company’s deposits been converted to nonvoting shares with the consent of depositors, he revealed.

As the parent company, leveraging the many strengths of Union Bank such as shareholder strength, stable financial position, brand image and over 16 years of expertise in delivering advanced financial solutions together with a comprehensive branch network , TF&G will benefit greatly to resurrect and forge ahead as a stronger business entity.

“With expertise and a business portfolio covering real estate, leasing, hire purchase, pawning and loans, and four 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,” said De Zoysa.

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 TF&G stand out on its own, while associating the core values of Union Bank hence inculcating strategic changes required to build the desired brand image that will enable TF&G to forge ahead as a stronger brand creating a distinctive positioning in the industry.

In July this year Union Bank announced that it received Central Bank approval to positively pursue the acquisition and highlighted that the Union Bank Balance Sheet had a positive outcome when stress tested for this acquisition.

De Zoysa further stated that the association of Union Bank with 16 years expertise in the banking industry, ShoreCap’s comprehensive expertise in investments in emerging economies and TF&G, with over 50 years history and expertise jointly leverages diverse strengths for the formation of a stronger and powerful entity.

He further highlighted that such private sector intervention with the support of the Government contributes positively to the development and stability of the finance industry and the economy of Sri Lanka.

With the international accreditation, status and profile of ShoreCap, 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.

Further, it will enable TF&G to leverage a unique value proposition that will drive the company to greater heights capitalising on the extensive experience and investment strategies of ShoreCap in underserved markets in the areas of micro lending, deposit mobilisation, capital re-structuring, new product development, business planning, risk management and other funding strategies.

With the infusion of capital to TF&G, a reconstitution of the Board of Directors was effected and a board led by Ajita De Zoysa, eminent business personality and Chairman of Union Bank, and a directorate consisting of an unique and diverse combination of local and international professionals and businessmen including Alexis Lovell, Davis Golding, Yiu Joe Toh, W.A.J. Warnakulasuriya, Upali Wijesekera and Malinda Samaratunge.