DBS Shares Gain on Optimism for Danamon Deal: Singapore Mover

DBS Group Holdings Ltd. (DBS), Southeast Asia’s biggest lender, rose to a two-week high on optimism its $7.2 billion bid for PT Bank Danamon Indonesia (BDMN) will be completed even as Indonesian authorities raise queries on its offer.

DBS, which announced its bid for Temasek Holdings Pte’s 67 percent stake in Danamon on April 2, said it also set the offer price for the remaining stock to be “transparent.” Kontan reported yesterday that the Indonesian regulator will seek an explanation from DBS on why the offer for minority shareholders was made before the Temasek deal closed.

Bank Indonesia also said last week it will seek talks on reciprocity with Singapore as a condition for the central bank’s approval of DBS’s bid, asking for equal treatment for Indonesian banks to operate in the neighboring city-state. Danamon shares have traded at an average of 6,336 rupiah since the DBS bid, lower than 7,000 rupiah price offered by the Singapore lender.

Danamon’s stock price “probably reflects the market’s skepticism about the deal due to not so-positive signals from the regulators,” Daiwa Capital Markets analysts Srikanth Vadlamani and Boon Aun Phua said in a report yesterday. “While we have been surprised by some of these comments, we believe that the likelihood of the deal going through is much higher than what is implied by Bank Danamon’s current share price.”

DBS climbed 0.7 percent to S$13.62 as of 11:42 a.m. in Singapore trading, rising for a fifth day to the highest since April 3. Danamon was unchanged at 6,250 rupiah.

Danamon Profit Gain

Danamon said yesterday its first-quarter profit rose 18 percent on higher demand for credit. Net income increased to 900 billion rupiah ($98 million) in the three months ended March 31 from 763 billion rupiah a year earlier. The bank is targeting lending growth of 18 percent to 20 percent this year, Henry Ho, President Director said at a press conference yesterday.

Nurhaida, head of Indonesia’s capital market supervisory agency, said yesterday she has met with executives from DBS and declined to comment on the Kontan report.

The Singapore lender said its offer for the remaining Danamon stake, which will be paid in cash, is equal to the value it placed on new shares issued to Temasek for its holding in the Indonesian bank. Temasek is Singapore’s state-owned investment company that’s also the biggest stakeholder of DBS.

DBS provided details of the offer for the remaining shareholders “in an effort to be transparent,” Karen Ngui, a DBS spokeswoman, said in an e-mailed response to queries yesterday. The Indonesian agency is “aware that the mandatory tender offer will only happen after the completion of the transaction” for Temasek’s stake in Danamon, she said.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Sanat Vallikappen in Singapore at vallikappen@bloomberg.net

To contact the editor responsible for this story: James Gunsalus at jgunsalus@bloomberg.net

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