BANGKOK, Feb 26 (Reuters) - Thailand's TMB Bank TMB.BK said on Tuesday it signed a non-binding agreement to merge with Thanachart Bank in a deal worth up to 140 billion baht ($4.47 billion), which would make the new entity the sixth largest bank in the country.
The planned merger follows government approval last year of tax incentives for bank mergers to help them better compete with larger regional rivals.
TMB will finance the deal through debt and equity. It will issue new shares worth 70 percent of the total deal, it said in a statement.
Some 50 billion-55 billion baht of newly issued shares would be offered to Thanachart Capital TCAP.BK and Canada's Bank of Nova Scotia BNS.TO while 40 billion to 45 billion baht would be offered to existing TMB shareholders and may include a public offering.
Nova Scotia Bank currently holds 49 percent of Thanachart bank with Thanachart Capital TCAP.BK holding 51 percent.
The combined bank would have assets of 1.9 trillion baht with 10 million retail customers, TMB said.
Synergies include enhancing deposits and retail lending, especially TMB's hire purchase business, and enabling the combined bank to raise funds more efficiently and greater economies of scale from combining infrastructure, it added.
The Thai government currently has a 25.92 percent stake in TMB with Dutch banking group ING INGA.AS , holding 25 percent.
ING, Thanachart Capital and the Thai finance ministry will be major shareholders in the new entity with ING and Thanachart Capital holding at least a 20 percent stake, the statement said.
Bank of Nova Scotia is expected to hold a significantly smaller stake.
($1 = 31.2900 baht)