The Asian asset management arm of Prudential will pay THB4.21bn($133m) for Government Savings Bank’s 25% holding in TFUND and 25.1% of the 75% stake owned by Thanachart Bank (TBANK), according to a statement by Eastspring.
The deal is subject to regulatory approvals and to the acquisition of TBANK by TMB Bank, which was agreed in principle last August. A year ago, Eastspring bought 65% of Bangkok-based TMB Asset Management (TMBAM) from TMB Bank.
Similar to the TMBAM acquisition, Eastspring has an option to increase ownership of TFUND to 100% in the future.
The latest move in Thailand follows the recent demerger of the Prudential Group’s UK and Europe (M&G Prudential) business, with Prudential plc now becoming Asia-led.
“By signing this agreement, we are seizing the opportunity to acquire a highly attractive business in the growing Thai market and work more closely with strong partners – TMB and TBANK,” said Nic Nicandrou, chief executive of Prudential Corporation Asia, in the statement.
TFUND is the eighth largest mutual fund manager in Thailand, with about THB212bn of mutual funds under management. It also operates private funds, a provident fund management and an investment advisory business. It has 107 mutual funds available, of which its Short-Term Bond is the biggest, with assets of THB46bn, according to Morningstar Direct.
Collectively, TFUND and TMBAM Eastspring would be the fourth biggest asset manager in the country, with a market share of 12% and combined assets under management (AUM) of around THB653bn, according to Morningstar Direct.
TFUND and TMBAM share a similar fund composition. Approximately 53% of TFUND’s products are fixed income compared with 63% of TMBAM’s products; both of them offer about one-third of their funds as equity products, while 85% of TFUND’s total net asset are domestic funds, and TMBAM has a similar proportion of 72%, according to Chayanee Juengmanon, senior research analyst at Morningstar Research (Thailand).
Although Eastspring was unable to respond to FSA before publication, earlier comments indicate how the firm intends to direct its Thailand businesses.
In July, Bernard Teo, Singapore-based head of corporate strategy, mergers and acquisitions at Eastspring, told FSA that he had identified “a number of gaps”, including active equities and multi-asset portfolios.
Teo also said that Eastspring planned to offer more foreign investment funds, and the head of distribution, Xavier Meyer, emphasised that it intended to delegate management of some them to Eastspring instead of distributing only feeder funds.
Thailand has strong potential for global and regional fund managers. It is one of the largest and fastest growing asset management markets in the Southeast Asia, fuelled by a growing middle class, rising affluence, an entrenched savings culture and low mutual fund penetration rate compared with more developed markets, according to the 2019 Cerulli report on Asset Management in Southeast Asia.
Foreign managers have the option to independently set up an onshore presence in Thailand. ASI and Manulife Investment Management are among the few that have done so, but Eastspring has chosen the joint venture route because of the distribution channels provided by the parent banks of the domestic fund manager.
When the merger of TBANK and TMB is completed, it will become the sixth largest bank in Thailand with 10 million retail customers, more than THB2trn in total assets, and 900 branches providing Eastspring access to a large and growing consumer base, according to the statement.
As Teo told FSA in the summer,“Thailand’s fund industry is highly dominated by bank-affiliated asset managers”.
