Bank Danamon Slumps on DBS Takeover Delay Concern

Bank Danamon Indonesia sank in Jakarta share trading amid concerns Singapore’s DBS Group Holdings’s takeover bid will be delayed as Bank Indonesia plans new bank-ownership rules and demands reciprocal treatment.    

Danamon fell as much as 14 percent, the most since Jan. 21, 2009, before closing 5.1 percent lower at Rp 5,600. The shares have declined 13 percent from a peak of 6,450 rupiah on April 2, when DBS announced the takeover. The Jakarta Composite Index added 0.4 percent. Bank Indonesia said on April 27 that it won’t approve DBS’s bid until after the country announces new ownership rules for banks and agrees to reciprocal arrangements with Singapore for lenders operating in the two countries.    

Bank Indonesia’s statement threatens to delay a deal that would have enabled shareholders to sell their Danamon stakes to DBS at Rp 7,000 a share in a tender offer. That’s 52 percent more than Danamon’s closing of Rp 4,600 on March 30. DBS, whose biggest shareholder is Singapore’s state-owned investment company Temasek Holdings offered to pay Rp 45.2 trillion ($4.9 billion) in new shares for its parent company’s 67 percent stake in Danamon and buy the rest for Rp 21.2 trillion in a tender offer.    

“It seems Bank Indonesia is very persistent in pushing for reciprocity,” Syaiful Adrian, an analyst at Ciptadana Securities, said in Jakarta. “This is making the Danamon takeover less certain.”                        

Ownership Rules    

Bank Indonesia Governor Darmin Nasution said it plans to issue new ownership rules for banks by June at the latest. The regulation, which applies to foreign and local investors, will still allow companies in highly regulated industries such as banking to own a majority stake in Indonesian lenders, Nasution said.    

The central bank met with officials from the Monetary Authority of Singapore in Washington to discuss the DBS bid and a reciprocity agreement, Nasution said, without giving details.    

Singapore’s Oversea-Chinese Banking Corp. owns 84 percent of Jakarta-based Bank OCBC NISP, according to data compiled by Bloomberg News. United Overseas Bank owns 99 percent of Bank UOB Indonesia, according to Bank Indonesia data as of September 2011.    

A total of 26 foreign banks, including Bank Negara Indonesia, have so-called full banking licenses in Singapore, allowing them to offer a wider range of services. Among the overseas lenders, eight have so-called qualifying full bank privileges, which lets them extend their operations to include 25 locations, share automated-teller machine networks and offer services linked to retirement savings, according to the Monetary Authority of Singapore’s Web site.                     

National Institution    

Indonesian officials have expressed reservations about DBS’s bid, which at a total value of $7.2 billion would have been the largest takeover by a Southeast Asian lender. Deputy Finance Minister Mahendra Siregar expressed concern on April 19 that Indonesia would lose a national institution.    

DBS will hold off on making acquisitions for the next one to two years following its offer for Danamon, Chief Executive Officer Piyush Gupta said today.    

“We do these things step-by-step and it will take us some time to actually integrate and get the value we want from Danamon, so we will not be in the market looking for other opportunities,” Gupta said in a Bloomberg Television interview aired today.

Bloomberg