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JAKARTA (TheInsiderStories) – Japan’s Bank of Tokyo-Mitsubishi UFJ (BTMU) has agreed to acquire 73.8 per cent or a majority stake of PT Bank Danamon Indonesia Tbk (IDX: BDMN), that will be purchased in three phases. Based on the agreed share price per unit, the total acquisition price would reach US$5.9 billion.

The two parties have entered into conditional share purchase agreements with Temasek’s unit Asia Financial (Indonesia) Pte. Ltd. and other affiliated entities on Dec. 26 to acquire Bank Danamon shares, subject to applicable regulatory approvals.

In the first phase, the bank will acquire an initial 19.9 per cent stake in Danamon or, based on a price of Rp8,323 per share (US$0.61) and at an investment amount of Rp15.875 trillion (US$ 1.17 billion).

MUFG intends to then seek regulatory and other relevant approvals to acquire an additional 20.1 per cent to increase its stake in Danamon to 40 per cent. This step is expected to close between Q2 – Q3 of 2018.

Upon completion of the second step, MUFG intends to seek the necessary approvals to increase their stake in Bank Danamon to 73.8 per cent. This will provide an opportunity for all other existing Danamon shareholders to either remain as shareholders or receive cash from MUFG.

The price was based on a 3Q17 P/B of 2.0x with certain adjustments applied. AFI will continue to be the majority shareholder in Danamon upon closing of Step 1, which is expected to be within a few days.

The price of shares per unit in the second and third phase is yet to be determined. Assuming that the price of shares per unit is the same, then the total acquisition price for the 73.8 percent would reach US$5.9 billion.

Asia Financial is a wholly-owned subsidiary of Fullerton Financial Holdings Pte. Ltd. This strategic investment by MUFG will be executed through three steps and completion of the proposed transaction will result in MUFG becoming the largest shareholder in Bank Danamon.

“Strategic Rationale MUFG’s investment in Danamon represents another crucial milestone for its strategic plans in Asia & Oceania,” said Takayoshi Futae, MUFG’s CEO for Asia & Oceania region in a statement.

In Indonesia, MUFG has been operating for 50 years and currently has a full services 2 branch in Jakarta, one sub-branch in Surabaya, and nine service points across the country.

Indonesia is the largest economy in ASEAN underpinned by excellent growth fundamentals including favorable demographics, a rich resource base and stable political climate.

MUFG’s investment in Bank Danamon is a strong testament to the bank’s optimism in the country’s long-term prospects and commitment to the ongoing development of the Indonesian banking sector.

MUFG expects that this investment into the country will positively contribute to the growth of the Indonesian banking sector and economy as a whole. MUFG will establish an integrated and comprehensive services platform that serves as a gateway for clients wishing to make inroads into Indonesia’s burgeoning economy as well as local companies keen on expanding into the region.

This investment will also strategically allow MUFG to benefit from Bank Danamon’s foothold in the developing local retail and small and medium enterprises segments to deepen its banking franchise in Indonesia.

 “Since 2003, we have been a shareholder in Danamon and will continue to be supportive of them. We remain invested in the company and look forward to working closely with MUFG during this period. Indonesia is a dynamic market and we continue to be optimistic about its growth and long term potential, as well as that of its financial services sector,” said Tow Heng Tan, Director, Fullerton Financial Holdings.

MUFG has invested in a 77 per cent stake in Bank of Ayudhya Public Company Limited (Krungsri) in Thailand, 20 per cent in VietinBank in Vietnam and 20 per cent in Security Bank Corporation in the Philippines.

MUFG is one of the world’s leading financial groups, with total assets of approximately $2.7 trillion as of Q317. The Group has a global network with over 2,300 offices across more than 50 countries.

The Group’s operating companies include Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking Corporation, and Mitsubishi UFJ Securities Holdings Co., Ltd. MUFJ has a global network spanning around 50 countries.

The Group’s shares trade on the Tokyo, Nagoya and New York (NYSE: MTU) stock exchanges.

While, Fullerton Financial Holdings (FFH) is a strategic and operating investor in financial and related services in Emerging Markets. FFH is a wholly owned portfolio company of Temasek Holdings, an investment company headquartered in Singapore. As at Dec. 31, 2016, FFH’s total assets stood at S$28.5 billion, and its portfolio includes investments in 10 financial institutions located in nine countries.

Sumitomo Eyes BTPN’s Majority Shares

Meanwhile othe financial holding Sumitomo Mitsui Financial Group (SMFG) is keen to raise its stake to a majority in mid-sized lender PT Bank Tabungan Pensiunan Tbk (IDX: BTPN) if authorities permit, the Japanese bank’s CEO said on Tuesday (26/12).

BTPN, which provides loans to pensioners and micro finance to small business owners, had a net profit of Rp1.37 trillion for Jan-Sept on assets of Rp93.79.

Japan’s second-largest bank by market capitalization spent a total of about $1.32 billion in 2013 and 2014 to buy 40 percent of BTPN. Indonesian laws restrict share ownership in the country’s banks by a single entity to 40 percent.

Japanese and other Asian banks are increasingly targeting a presence in Indonesia in the hopes of tapping an emerging middle class in Southeast Asia’s largest economy with population of over 250 million.

South Korean Shinhan Bank acquired a majority stake in Bank Metro Ekspress in 2015, while China Construction Bank entered the Indonesian market by acquiring Bank Windu in 2016.

However, Indonesia can relax these curbs on special grounds, including if the investing bank is financially strong.

SMFG and rival banks face persistently low interest rates at home and stricter capital rules globally, adding pressure on them to seek growth drivers.

US$1: Rp13,500

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