EXCLUSIVE: DBS gets regulatory approval to buy 40% stake in Bank Danamon | Company data
(The Insider Stories) – The Indonesian central bank has given the nod for DBS Group Holdings Ltd.’s (D05) planned multibillion dollar acquisition of Bank Danamon (BDMN), with the processing of the legal documents for the deal likely to be completed in May, sources with direct knowledge of the matter said Friday.
Singapore’s DBS is the biggest commercial bank in Southeast Asia by assets and announced the $7.3 billion bid for Indonesia’s sixth-biggest bank a year ago, proposing to first purchase a 67.4% stake in Danamon that is owned by Singaporean sovereign fund Temasek Holdings Pte. Ltd., a controlling investor of DBS, then making a mandatory tender offer to buy outstanding DBS shares from the public, netting it up to potentially 99%.
The delay by Bank Indonesia (BI) in giving the green light, which created uncertainty over the deal, was partly because it was formulating a regulation relating to ownership of banks, which was published last year and requires stricter governance, limitations on operations based on the bank’s capital, and for owners to have an established track record. The sources told The Insider Stories that DBS will be allowed to initially buy 40% of Danamon and then build up to a majority holding if it meets BI’s corporate governance and financial health standards.
The go-ahead from BI also implies that it is nearing an understanding with the Monetary Authority of Singapore (MAS) on reciprocity, with Indonesian banks like Bank Mandiri (BMRI) and Bank Negara Indonesia (BBNI) among those seeking to open full branches in Southeast Asia’s financial hub, although authorities are tight-lipped. BI governor Darmin Nasution said only that, “We hope we can come up with a decision in early May” and that it is still discussing the reciprocity issue with the MAS.
Singapore has one of the region’s most restrictive environments for foreign operators, whereas Indonesia allows foreigners to own up to 99% stake in a bank. In most Asian countries, foreign investors can only hold less than a 50% stake in a local bank.
The deal would be the biggest acquisition in Indonesian history and give DBS a bigger footprint in the growing Indonesian market. The International Finance Corp. says banking penetration in Indonesia is only 32% of gross domestic product.
