DBS wins approval to buy Indonesia bank stake from Temasek

Singapore-based DBS first expressed interest in acquiring a stake in publically-traded Danamon from Temasek a year ago. Temasek owns 67.37% of Danamon as well as being the controlling shareholder in DBS, in which it holds a 29.7% stake.

DBS is eventually looking to acquire up to 99% of Danamon, saying it would first buy Temasek's stake and then make a general offer for the rest of the shares. Last year the bank said it would offer IDR7,000 in cash for each of the remaining shares, valuing the entire company - Indonesia's sixth-largest lender by assets, with a 3,000-branch network and six million customers - at 2.62x book value.

Indonesia's central bank delayed approving the deal as it considered new rules on bank ownership. Under those rules, issued in July, both foreign and domestic banks are limited to initial stakes of 40%. Those stakes can be raised provided the bank being acquired meets standards for corporate governance and financial health.

According to The Wall Street Journal, Central Bank Governor Darmin Nasution said DBS would only be allowed to buy the bank in its entirety if Singapore showed "reciprocity" by allowing Indonesia's banks to open more branches there. The Monetary Authority of Singapore said in a statement that it was working with Indonesia's central bank to explore further access between the markets with a broader provision of financial services by Indonesian banks in Singapore.

Analysts said the rules announced in July may make foreign investors reconsider investing in Indonesia, where the banking sector was previously the most open of any in Southeast Asia, with no limits on foreign ownership. In most Asian countries, foreign investors are restricted to holding less than 50% of local banks.

Despite regulatory restrictions, Indonesian banks remain attractive targets. Earlier this month, Sumitomo Mitsui Financial Group (SMFG) agreed to pay around $1.52 billion in stages for a 40% stake in Indonesian lender Bank Tabungan Pensiunan Nasional (BTPN) - in compliance with the regulatory cap on foreign ownership - from global PE firm TPG and its Indonesian partner, Northstar Pacific Partners.

Nasution said the central bank will likely also approve SMFG's purchase of the stake in BTPN, which is focused on microfinance, because the Japanese bank has pledged not to change BTPN's business model and to keep its management in place for a year.

 

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• Topics
• Southeast Asia
• Regulation
• Financials
• Indonesia
• Singapore
• regulation
• Financial Services
• buyout