MUFG Enters Talks to Buy Thai Lender

Japan's Mitsubishi UFJ Financial Group Inc. has entered exclusive talks with GE Capital to buy its roughly 25% stake in Thailand's Bank of Ayudhya but red tape is drawing out negotiations, people with knowledge of the deal said.

MUFG, which has an existing entity in Thailand, is trying to figure out how to shut that entity and roll outstanding loans into Ayudhya because under Thai law, banks can have only one presence in the country. It is also hammering out the future governance of Bank of Ayudhya with its other big shareholder, the Ratanarak family, led by billionaire Krit Ratanarak.

It signed a memorandum of understanding with GE Capital recently, one person with knowledge of the deal said.

Other potential buyers of Thailand's fifth-largest bank by assets are in the background, the people said. Malaysian sovereign-wealth fund Khazanah Nasional made a bid for Bank of Ayudhya months ago, the people said.

GE Capital, the giant finance unit of General Electric Co., received bids in an auction of its stake in November, people familiar with the deal at the time said; MUFG was one of those bidders.

Japan's biggest bank by assets and market value is keen to expand outside its domestic market, where loan demand is sluggish following two decades of economic stagnation. In contrast with Japan, the Thai banking market is flourishing. The Thai banking sector is one of the fastest-growing in Asia due to loan growth, healthy spreads between banks' funding costs and lending rates, and falling expenses.

GE Capital initially bought 25% of Bank of Ayudhya in 2007 at 16 baht (52 U.S. cents) a share, subsequently raising its holding to 32.9%. Analysts have said GE Capital's investment has improved the Thai bank's operations, especially in the area of consumer loans.

GE Capital sold 7.6% of Bank of Ayudhya in September and its president and chief executive officer, Mark John Arnold, said he would resign from both positions effective Jan. 1. Mr. Arnold is one of GE Capital's representatives at the bank.

Morgan Stanley is advising GE Capital on the sale, people with knowledge of the deal said.

--Atsuko Fukase in Tokyo contributed to this article.