Indonesia's most successful domestic consumer bank appears ready to finally change hands. A landmark debt-restructuring deal and the long-awaited sale of a controlling 51% stake in Bank Central Asia has entered its final phase. The buyer will be named by the middle of March, says I Putu Gede Ary Suta, chairman of the Indonesian government agency that's selling the bank.
Valued at about $500 million, the BCA deal is key to the Indonesian government's strategy to prove to investors that it has assets worth buying. The sale would be the first restructuring of banks seized from cronies of former President Suharto in 1998. The government's Indonesian Bank Restructuring Agency also hopes to stimulate investor interest in two other consumer banks that are due to go on the block -- Bank Niaga and Bank Danamon -- as well as bonds, rehabilitated loans, and other assets. In total, IBRA hopes to rake in a total of $4.8 billion by yearend and use it to fill the country's yawning budget deficit.
A usually good sign by the standards of an Indonesian auction is that secrecy shrouds the BCA deal. Also, it's not at all clear which of the two bidding consortiums, led by Britain's Standard-Chartered Bank and Farallon Capital Management of San Francisco, will win the prize. Both have submitted what Ary Suta describes as nearly identical business plans, and he says they appear equally qualified.
Both bidders plan to keep BCA as a consumer banking powerhouse. They have also signed documents promising not to sell it back to the former shareholders -- the families of former President Suharto and founders of the diverse Salim Group conglomerate. If Stan-Chart wins, it won't rebrand the bank, says Ary Suta, citing its business plan.
But that's apparently no reassurance for the 6,000 BCA employees who shut down branches and paralyzed Jakarta traffic on Mar. 11 with a massive protest against the sale. Many are worried about getting laid off, and Indonesian Planning Minister Kwik Kian Gie says the deal should be delayed. "If Farallon or Stan-Chart have a vision for BCA, they aren't telling," says a Western management consultant in Jakarta. "The deal would go a lot smoother if they did."
Ary Suta insists that Indonesia can't afford to delay the deal much longer, however. The Farallon and Stan-Chart consortiums were selected from among 24 bidders who have jumped through several hoops since early last year. In a semifinal "drop-dead" test in January, the two convinced IBRA that they would not sell out to the former shareholders and that they were qualified financial institutions. At the same time, they also passed a "fit-and-proper" test conducted by Bank Indonesia and produced a $50 million letter of credit. "You don't just offer the highest price and win," says Ary Suta.
The winner is to be selected later this week in meetings with two different government committees that began on Mar. 6, says Ary Suta. Within IBRA, a seven-member working committee reports to a five-member steering committee, on which Ary Suta sits. While he claims he'll deliver the final decision himself, his immediate superior, State-Owned Enterprises Minister Laksamana Sukardi, has said in public that the final decision will come from his own office. "The decision doesn't rest with one person," admits Ary Suta.
Finance industry sources say the general expectation is that Stan-Chart will emerge as the winner. They say the British concern, which has a small share of Indonesia's corporate and consumer banking markets, plans to use BCA to enter the domestic retail market, which no foreign bank other than Citibank has ever penetrated significantly.
Some Indonsian sources are skeptical that the deal is about to close. They point out that IBRA officials have made similar claims on several other occasions. Still, Ary Suta insists that the end is near. "There's a cost to delaying this process, so why delay?" he says. The Paris Club of creditor nations, which is expected to roll over $4.5 billion of the Indonesian government's debt in April, would no doubt agree.
By Michael Shari in Jakarta
Edited by Douglas Harbrecht