Array

KARACHI, May 23 (Reuters) Britain's Standard Chartered Bank Plc. may take a majority stake in Union Bank Ltd., Pakistan's sixth-biggest listed lender, in what could be the largest foreign acquisition in the country's banking sector, officials said.

Standard Chartered has begun due diligence of Union Bank, which has total assets worth more than $2 billion and deposits of around 93 billion rupees ($1.55 billion), according to central and commercial bank sources with knowledge of the deal.

''I can confirm Standard Chartered has been granted permission to conduct due diligence of Union Bank,'' said a senior State Bank of Pakistan official, requesting anonymity.

A notice issued by Union Bank to the Karachi Stock Exchange confirmed the intended sale of a majority of its shares, but did not name the probable buyer.

''The sponsor majority shareholders of Union Bank have informed the bank that they are in discussions for the sale of their entire shareholding in the bank,'' it said.

Union Bank's chairman, Saudi investor Abdullah Basodan, is the major shareholder with a 49.06 percent stake as of Dec. 31, which, at the current price of 78 rupees a share, would cost around $216 million.

''DEAL ON'' A senior official at Union Bank said the deal was on.

''I can say that the deal is at an advanced stage and would be completed soon,'' said the official, asking not to be named.

''I think it would definitely be completed in the next 10 weeks or so, after which Standard Chartered will take over Union Bank's operations,'' he said.

A Standard Chartered spokesman declined to comment on the proposed deal.

''We have a stated strategy of organic growth supplemented with select alliances and acquisitions,'' said Amer Daudpota, the bank's head of corporate affairs. ''But we do not comment on specific activities.'' Standard Chartered currently operates a network of 45 branches in Pakistan, while Union Bank has 53 branches.

Analysts said this would be the biggest foreign acquisition in the country's banking sector.

Last July, Singapore state investment agency Temasek Holdings tripled its stake in Pakistan's small commercial NIB Bank (NDLC-IFIC Bank) to 72.6 percent, worth then around $57 million.

In February, the Pakistan government said it planned to sell 20 percent of third-ranked lender United Bank Ltd (UBL), reducing its stake to 24.5 percent. It had sold 51 percent of UBL to a consortium of UAE-based Abu Dhabi Group and a British conglomerate in 2002.

Union Bank had 2005 net profit of 1.74 billion rupees, more than double the 830 million rupees it earned in 2004.

Its shares have soared more than 12-fold since late-2003 and trade at around 15.2 times 2005 earnings per share, a little cheaper than UBL and fourth-ranked Allied Bank of Pakistan Ltd. , but dearer than leaders National Bank of Pakistan Ltd. and Muslim Commercial Bank Ltd.

($1=60.10 Pakistani rupees) REUTERS CS DS1643