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AG Bank goes private in Japanese purchase

Last month HS Securities of Japan secured the 100% purchase of Agricultural Bank of Mongolia when its head, Hideo Sawada, delivered $6.85 million to Ulaanbaatar.

Like several state-owned banks in Vietnam, China and Russia, AG Bank was bankrupt after providing government-directed loans, provisions and state pensions while cultivating a NPL portfolio of 100%.

The previous government in 2000 decided with the central Mongol bank to privatize AG Bank within two years. The succeeding MPRP government reaffirmed that decision and issued a tender for its sale through the state property committee.

The $3.5 million minimum bid tender, organized by KPMG Barents, attracted three bids, each having to provide plans for the development of the bank. The government retained the right to veto any proposal if it felt it did not meet the interests of the Mongolian people. All three were approved.

HS Securities bid highest at $6.85 million, Russia's Alfa Bank offered $6.2 million and a local consortium lead by Golomt Bank bid $5.28 million - "much lower than advised", according to one local analyst.

Development Alternatives Inc (DAI) took control of AG Bank two years ago under an agreement between the Mongolian government and the US Agency for International Development.

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