Czech-based financial group PPF has signed an agreement with Japan’s Mitsubishi UFJ Financial Group (MUFG) and affiliates to sell the Philippines and Indonesian businesses of its consumer finance brand Home Credit Group (HC) for about €615mn. The deal comes as part of PPF's shift away from Russian and Asian markets to refocus on Europe.
MUFG Bank together with its Thai and Indonesian units will finance the acquisition, which is expected to close by the second half of 2023 following shareholders' and regulatory approvals. The final consideration is subject to one-to-one adjustment based on the equity book values at the closing of the transactions.
Home Credit's operations in Asia have been hit by the COVID-19 pandemic and the increased cost of finance. In June, PPF's incoming CEO Jiri Smejc said it was looking to sell its Chinese operations but wanted to develop Home Credit in India, Vietnam, Indonesia and Philippines, though it needed partners with banking licences to secure access to cheap funding from deposits.
However, in August Bloomberg reported that MUFG was in negotiations to buy the Indonesian and Phillippines businesses. It is understood that discussions were originally about a partnership but MUFG then chose to take full control of the consumer finance businesses.
Krungsri Bank and MUFG Bank are to purchase 75% and 25% respectively of Home Credit Philippines for a valuation of €406 million. In Indonesia, Krungsri, Adira Finance and an Indonesian investor as required by local regulations are to purchase 75%, 10%, and 15%, respectively of Home Credit Indonesia for a valuation of €209 million.
Home Credit Philippines and Indonesia were launched in 2013 and HC’s CEO Jean-Pascal Duvieusart said in PPF’s press statement that “it is now the right time for us to pass the baton onto new shareholders who can accelerate growth for these two exciting businesses”.
Reuters reported the MUFG is boosting its presence in Asia and that it is looking for further acqusition opportunities in Southeast Asia and is also undergoing a “global business reshuffle”.
PPF is still looking to offload its Chinese Home Credit business, which has been hit hard by the Communist regime's "zero-covid" policy of lockdowns.
PPF has also been seeking to offload its big Russian operations after the imposition of sanctions on Russia following the Kremlin's invasion of Ukraine. PPF reached an agreement in May and then finally completed the sale of Home Credit’s Russian branch and its subsidiaries in September to investors headed by Ivan Tyryshkin, described by PPF as the architect of “modern financial markets in Russia”.
In August it had announced the sale of its Moscow land portfolio to Evraz shareholders. The write-downs from these divestments will be taken in PPF's first half results due out next month.
PPF still has some real estate investments in Russia, as well as PPF Life Insurance. "PPF is in the process of divesting all Russian assets," spokesman Leos Rousek told bne IntelliNews.
The Czech financial group is expected to use the proceeds of its divestments in Russia and Asia to fuel investments in Europe.
PPF and Smejc's Emma Capital have made a push into the energy and telecommunications markets in Southeastern Europe in recent years. In an interview for Czech outlet Seznam Zpravy earlier this month, Emma Capital’s CFO Pavel Horak, who was also a longtime CFO of PPF and Home Credit, said this region “is not as bastardised as Western Europe is […] by welfare state or labour unions”, and that the region “appears familiar to what we know” from Czechia.
Smejc, a business partner of late PPF founder Petr Kellner, is majority shareholder of Emma Capital investment company, which also holds 8.88% of HC’s shares, while PPF holds the remaining majority of shares.