INDONESIA - BANKING - DBS bid to take over Danamon in limbo

www.thejakartapost.com -A proposed change to Indonesia's bank ownership limits is threatening to dash DBS Group's bid to take over Bank Danamon.

Sources told Reuters that Indonesia's central bank is planning to limit the maximum stake a single shareholder can take in the country's banks to below 50 per cent, down from 99 per cent now.
This would likely scupper DBS' plan to buy a 67.4 per cent stake in Danamon from Temasek Holdings for $9.1 billion.
But some political observers are optimistic that the final policy change will not be so drastic, as senior Cabinet figures are concerned that foreign investors might be turned off by the move.  (source)


If the ownership limit is lowered to below 50 per cent, several investors would be forced to divest at least part of their controlling stakes in various Indonesian banks.
Eight of Indonesia's top 11 banks by market value are controlled by foreign banks, business families, private equity firms or wealth funds.
Malaysia's CIMB Group, for example, controls CIMB Niaga, while Malaysian Banking (Maybank) owns a majority stake in Bank Internasional Indonesia.
The central bank is expected to set out differing ownership rules depending on whether the shareholder is another financial institution, a non-financial institution or a family, Reuters said.
Family shareholdings are expected to be given the lowest threshold, but all are expected to be under 50 per cent, it added.
The wealthy Hartono family, for example, owns a 47.6 per cent stake in Bank Central Asia.
CIMB analyst Song Seng Wun said he is confident the Indonesian government will take a more moderate approach towards limiting bank ownership, so as not to risk alienating foreign investors.
'I think that perhaps they would let the DBS deal take place first, and only after that they might say, we will change the ownership rules and not be so liberal,' he said.
'And I don't think the rule would be retroactive, so it should not affect those shareholders who already have controlling stakes in Indonesian banks now. A complete U-turn would certainly have an impact on investor sentiment,' he added.
The DBS buyout has been in limbo since last month, when the Indonesian central bank said that it would not approve the deal until it had announced new ruleson bank ownership. It is expectedto do so next month.
A DBS spokeswoman said on Thursday that it could not comment on the matter as Indonesian regulators have yet to issue any formal announcements.
'We will be guided by the Indonesia regulators in all that we do and will cooperate fully with them.
'DBS will work closely with local regulators to ensure that the process runs smoothly and meets all regulatory requirements,' she added.
DBS' plan, if it goes through, will propel it to being the No.5 lender in Indonesia.

Source: http://www.thejakartapost.com/news/2012/05/25/dbs-bid-take-over-danamon-limbo.html  - May 25, 2012