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Japan's Mitsubishi UFJ, the country's largest lender, said Tuesday it planned to buy 75 percent of Thailand's Bank of Ayudhya for about $5.6 billion.
The deal, which is subject to regulatory approval, would be the biggest by a Japanese lender in Southeast Asia.
"With its potential for future growth and a track record of consistent economic growth, Thailand has become an economic centre of Greater Mekong," Mitsubishi said in a statement.
"Thailand and Japan enjoy a close relationship with numerous Japanese companies now operating in Thailand," it added.
"(Bank of Ayudhya) is one of the leading commercial banks in Thailand offering diversified financial services while holding wide range of client base and market knowledge."
Mitsubishi said it would offer shareholders, including US-based General Electric, a price of 39 Thai baht ($1.25) per share.
The Japanese firm said it was aiming to close the proposed deal by December.
Internationally, the deal would be one of Mitsubishi's biggest. It invested 900 billion yen to buy a stake in Morgan Stanley in 2008, throwing the troubled Wall Street giant a lifeline during the financial crisis.
In December Mitsubishi announced it bought a 20 percent stake in state-owned VietinBank worth about $743 million, the largest-ever foreign investment in Vietnam's banking sector.
In April a US unit of Mitsubishi said it had reached an agreement to buy a real-estate lending business run by PB Capital Corporation, a Deutsche Bank Group company.
A sale price for that deal was not immediately disclosed, but the leading Nikkei business daily said it would cost the Japanese bank more than 300 billion yen
Japan's so-called mega-banks have strong balance sheets and have increasingly been looking abroad as the domestic market's growth potential remains lacklustre.
Rivals Sumitomo Mitsui Financial Group and Mizuho Financial Group have also looked overseas to expand.
In May Sumitomo Mitsui struck an agreement for a 40 percent stake in Indonesia's PT Bank Tabungan Pensiunan Nasional for about $1.5 billion. Two years ago Mizuho announced a plan to buy a 15 percent share in Vietcombank.
Bank of Ayudhya, established in 1945, is Thailand's fifth-largest lender with about 600 branches and over 18,000 employees.
Established by the Ratanarak family, which runs a television broadcaster, Bank of Ayudhya holds the equivalent of around 3.4 trillion yen in assets.
The bank handles personal loans and credit cards and is strong in transactions with small and medium-sized businesses.
About 4,000 Japanese companies operate in Thailand, a major export base that is home to a burgeoning middle class.
Tuesday's announcement comes about two weeks after New York state slapped Mitsubishi-UFJ with a $250 million fine for handling money transfers that violated sanctions on Iran as well as on Sudan and Myanmar.