Photo credit: Bank Danamon

Deal valued at $1.7bn aimed at acquiring future majority ownership

JAKARTA (TheInsiderStories) – Japan lenders Bank of Tokyo-Mitsubishi UFJ (BTMU) aims to buy roughly 40 per cent of publicly listed PT Bank Danamon Indonesia Tbk (IDX: BDMN) with an eye toward a future majority stake, Nikkei reported on Oct. 8.

The Mitsubishi UFJ Financial Group unit’s board decided on Wednesday to begin negotiations in earnest with Singaporean state wealth fund Temasek Holdings, as well as with local authorities. BTMU seeks to turn Bank Danamon into an equity-method affiliate as early as mid-2018, entitling it to a cut of the Indonesian lender’s earnings. The initial investment is seen at around US$1.76 billion.

Previously in 2012, DBS Group Holdings Ltd has an agreement with Fullerton Financial Holdings Pte. Ltd. (FFH) to acquire 100 per cent of its wholly-owned subsidiary Asia Financial (Indonesia) Pte. Ltd., which holds a 67.37 per cent stake in Bank Danamon for total consideration of Rp45.2 trillion ($3.35 billion) based on an agreed price of Rp7,000 per share.

But in 2013, the bank own by Temasek Holdings cancelled the planned. at that time DBS appointed Credit Suisse and Morgan Stanley as its joint financial advisers and PT Danareksa Sekuritas as its domestic adviser on the proposed acquisition of Danamon.

Jakarta-based Bank Danamon is Indonesia’s fifth-largest bank by market capitalization and ranks eighth by total assets. Net profit grew 14 per cent to Rp2.79 trillion for the fiscal year that ended in Dec, 2016. The bank holds a solid presence in both retail and corporate banking, boasting a domestic network of more than 1,800 locations group wide.

Bank Danamon is a full service commercial bank in Indonesia, with a nationwide presence of approximately 3,000 branch offices and outlets and approximately 6 million customers. It has a market leading presence in microfinance, auto lending and a growing business in the small and medium enterprises (SME) and retail segments.

Meanwhile, BTMU has pursued Southeast Asian deals in recent years, starting with a 2012 agreement to purchase about 20 per cent of the Vietnam Joint Stock Commercial Bank for Industry and Trade, better known as Vietinbank.

The Japanese bank spent 170.6 billion baht ($5.15 billion at current rates) in 2013 to acquire 72 per cent of Thai lender Bank of Ayudhya, and it took a 20 per cent stake in the Philippines’ Security Bank last year. Buying Bank Danamon would provide a foothold in one more major market.

BTMU’s gross profit in the Asia-Oceania region totaled just $8.9 billion in 2014, compared with $22.9 billion for HSBC, according to Nomura Securities. The Danamon deal would add an estimated $500 million-plus to the Japanese lender’s total, putting it closer to players such as Citigroup.

The move also would boost the share of BTMU’s profits earned overseas from 40 per cent now to more than 50 per cent, a first for a Japanese bank. As international measures to combat money laundering and terrorism financing grow stricter, BTMU plans to perform careful due diligence to detect any compliance concerns that could force it to break off the talks.

US$1: Rp13,500

Written by Linda Silaen, Email: linda.silaen@theinsiderstories.com