BCA bidders: When things are not as they seem
BCA bidders: When things are not as they seem
Berni K. Moestafa, The Jakarta Post, Jakarta
The final bidders have been announced, the financial markets are
calm, the International Monetary Fund (IMF) is satisfied, so what
worries analysts behind one of the country's most controversial
divestment efforts: the sale of Bank Central Asia (BCA)?
For one, it is the bidders, said Mirza Adityaswara and Lin Che
Wei, two banking analysts who have followed the BCA sale process
from scratch.
"The key for the country is not only how to get a prudent
investor, but also to get a good price," Mirza said in a report
of the Business Reform and Reconstruction Corp. (BRRC) last week.
His statement seems to summarize everyone's hopes for an
investor who can revitalize BCA -- a bank big enough to help
accelerate the recovery of the entire banking sector.
BCA was once the country's largest private retail bank. The
government nationalized BCA after its former owner, the Salim
Group, mismanaged the bank, requiring billions of U.S. dollars in
state-funded bailout funds to save it from collapse.
Nearly two years of efforts to return BCA to private hands is
coming to an end, with the Indonesian Bank Restructuring Agency
(IBRA) announcing the four final bidders last week.
The reaction has been positive thus far, including from the
financial markets and the IMF, which has made the BCA sale part
of its loan requirement.
Yet a closer look at the four final bidders may revoke old
fears of deception marring the sale process.
All bidders have entered the final stage as consortia, each
including at least one local investor.
Mirza said the composition of a consortium had much to do with
the criteria IBRA imposed in the first round of tests to filter
out a winning buyer for BCA.
One is that a financial institution must lead the consortium,
another that no investor may have any ties to Salim, whom the
government has banned from reentering BCA.
In this respect, the Bank Mega consortium passes the first
criterion, but may stumble on the second one.
"The Bank Mega consortium does not want to disclose members of
its consortium, and we do not think it would pass this test,"
Mirza said.
Despite the lack of transparency to date, a clearer picture
may emerge once Bank Indonesia, which examines bidders'
identities, finalizes its fit-and-proper test on Bank Mega.
Che Wei also questioned the capabilities of Bank Mega, which
he described as "a small fish trying to eat the big one (BCA)".
Next comes the GKBI consortium, which Mirza said was likely
being led by Jamsostek, a state-owned social security company.
Given its blotchy record, he said many believed Jamsostek had
trouble managing itself, let alone a bank the size of BCA.
Che Wei added that the other three bidders in the GKBI
consortium did not look convincing either. They are GKBI
Investment, PT Saratoga Investment Sedaya and PT Rifan Financindo
Asset Management -- names that ring no bells among the banking
community.
While the local bidders somewhat lack credibility, the foreign
ones appear to have compromised theirs.
They are the U.S. investment firm Farallon Capital, and the
British-based Standard Chartered Bank Plc.
Farallon teamed up with up Farindo Holdings Ltd. and Alaerka
Investment Ltd, a company owned by shareholders of cigarette
producer PT Djarum.
Sources say Djarum already owns a 14 percent stake in BCA
through an undisclosed ownership in the stock market.
The Capital Market Supervisory Agency (Bapepam) did question
the unknown investors of BCA's 14 percent stake, but fell short
of exposing them.
Thus far, there is no established link between the
shareholders of Djarum and Salim.
Salim owns another 7 percent in BCA through IBRA under
collateral, which for unknown reasons has not been sold yet.
On Farallon, Che Wei said it might be a reputable investment
firm, but as such its main interest was in making a profit out of
reselling BCA later on.
Farallon reportedly wanting to turn the strong retail BCA into
a corporate bank might also get the bidder into trouble.
The bidder must outline its business plan for BCA to Bank
Indonesia first and IBRA next must approve of the plan.
Standard Chartered joined the final bid with the government of
Singapore Investment Group Pte, Ltd., insurance firm Prudential
Plc. and PT Berca Indonesia.
Berca may be the weakest link in this consortium, which just a
month ago consisted only of Standard Chartered.
The British bank reportedly had to find a bidding partner as
purchasing a controlling stake in BCA would affect its rating.
Drumming up Singapore Investment Group and Prudential should
have make a solid enough consortium to risk an investment in BCA.
Che Wei then questioned why Standard Chartered had teamed up
with Berca, which before was a competing consortium for BCA.
Berca is controlled by Murdaya Po, who was said to have had
close ties with former president Soeharto.
Last month, Standard Chartered denied reports that the still
influential Soeharto family had lobbied the bank for a stake in
BCA.
Both Che Wei and Mirza agreed that the inclusion of local
investors in the two foreign consortia was to secure some level
of political support.
This might be to avert a political backlash from antiforeign
sentiment.
But the questions surrounding their local partners reinforce
fear that Salim might still be able to regain control of its once
most precious asset.