DBS Bid for Danamon Near Approval, Presidential Adviser Says

DBS Group Holdings Ltd.’s bid for PT Bank Danamon Indonesia is set to be approved as soon as this month as Singaporean and Indonesian regulators near an agreement over bank access, according to Chairul Tanjung, an economic adviser to Indonesia’s president.

DBS’s proposal to buy Danamon for $6.77 billion has been on hold for almost a year as Indonesia’s central bank weighed the deal while seeking greater access for its own lenders in Singapore. DBS has recently stepped up discussions with Bank Indonesia over the acquisition’s structure and final ownership levels, two people with knowledge of the matter said, asking not to be identified because the discussions are confidential.

“We want our neighbor to become like family, if we are kind to them, please be kind to us,” Tanjung, chairman of Indonesia’s CT Corp., which controls PT Bank Mega, said in an interview in Hong Kong yesterday.

Regulatory approval would help DBS gain access to more profitable lending opportunities, while clearing the way for further acquisitions of Indonesian banks. Mitsubishi UFJ Financial Group Inc. is among banks considering a purchase of a stake in Indonesia’s PT Bank Tabungan Pensiunan Nasional, people familiar with the matter said this month.

Stock Reaction

Danamon rose 5.8 percent to 6,350 rupiah as of 3:16 p.m. in Jakarta today, the stock’s biggest gain in more than nine months. At that level the shares are still more than 9 percent below what DBS plans to offer the lender’s shareholders, other than Temasek Holdings Pte, reflecting investors’ doubts about the deal. DBS rose 0.2 percent to S$15.62 a share.

“For Danamon shares, the overhang will be over when the market gets some sense that the deal with DBS will go through,” said Tjandra Lienandjaja, a Jakarta-based analyst at PT Mandiri Sekuritas. “Everything’s ultimately in the government’s hands.”

Bank Indonesia and the Monetary Authority of Singapore have “finalized an understanding,” Tanjung said. Tanjung, who is chairman of the national economic committee to President Susilo Bambang Yudhoyono, said he has been informed of the matter by Indonesia’s central bank.

The Indonesian regulator is targeting approval of the deal this month, although the deadline could slip by a few weeks, he said. A spokeswoman for Singapore’s monetary authority said the central bank does not comment on speculation, while an official at Bank Indonesia also declined to comment.

66 Trillion

DBS is seeking to tap rising demand for banking services in Southeast Asia’s fastest-growing economy, which will average 6.4 percent from 2013 to 2017, the Organization for Economic Cooperation and Development estimated in November. The sixth-largest bank in Indonesia, Danamon has more than 3,000 branches across Indonesia with about 6 million customers.

Indonesia may approve the DBS acquisition of Danamon while Singapore simultaneously announces it will provide an operating license for Indonesian banks, Tanjung said.

DBS said on April 2 last year it would pay 66 trillion rupiah ($6.77 billion) to acquire Danamon in two steps -- first obtaining the 67 percent currently held by Singapore investment company Temasek, and then making a 7,000 rupiah-a-share cash offer for another 32 percent.

Bank Indonesia said the same month that it was seeking equal access for Indonesian lenders to expand in Singapore, without being more specific, and then said a review of the bid would wait for new bank-ownership rules.

New Rules

Any lender seeking to purchase more than 40 percent of an Indonesian bank must meet capital adequacy requirements and be committed for a “certain period of time,” according to regulations released last July. The acquirer also needs to show good corporate governance for three consecutive assessment periods over a five-year span, the bank said, without specifying the length of each assessment period.

Karen Ngui, a Singapore-based spokeswoman for DBS, Southeast Asia’s largest bank, declined to comment. Chief Executive Officer Piyush Gupta said Feb. 6 that he’s positive about the approval coming through, based on signals coming from Bank Indonesia.

“We are not in the position to comment on the regulators,” said Vera Eve Lim, finance director at Danamon. “We continuously comply with BI’s regulations and policies.”

Stephen Forshaw, a spokesman for Temasek said he declined “to comment on market speculation.”

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