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.