Vietnamese lender Military Bank has agreed to merge with Song Da Finance (SDFC), the financial arm of state-owned construction firm Song Da.
Under the terms of the deal, Military Bank will issue an addition of 31 million shares in exchange for 68.6 million SDFC shares, thereby raising its charter capital from VND11.59trn ($517.4m) to over VND16.3trn ($715.2m).
Following completion of the deal, Military Bank plans to set up its own consumer finance firm comprising charter capital of VND500bn ($22.2m).
During the first two years, the new company will be equipped with facilities, personnel and a distribution network to foray into the consumption finance market.
From the third year, the company will expand its market share and operations, as well as diversify its products and customers.
In addition, Military Bank has also sought permission from the central bank of Vietnam to enable strategic investors own up to 49% in the subsidiary.
The lender has also sought direct support for the new company regarding financial status and liquidity in the first five years, or in case the company faces liquidity issues, and preferential tax rates during the first three years following the merger.