Divestment price of Bank Niaga

Divestment price of Bank Niaga

The Indonesian Bank Restructuring Agency (IBRA)'s plan to
divest the government's shares in Bank Niaga will again have to
be postponed because the prospective investor, Malaysia's
Commerce Asset Bhd, and Indonesia's House of Representatives,
whose approval IBRA needs for its every step, are yet to agree on
the price of the shares to be transacted.

What matters most in this divestment process is the benchmark
to determine the price of the shares to be sold. IBRA and the
House must first agree on this standard, because relying on the
market price in the case of a listed company can be misleading.

The market price can serve as a standard only if the market is
ideal: it does not produce asymmetric information, it is free
from monopolies and dominant market powers and it is governed by
impartial government policies. Unfortunately, the Indonesian
capital market is still far from ideal. Relying on the market
price for the divestment process is therefore risky.

IBRA as the shareholder must have enough information to enable
it to set a proper price, or at least a proper floor price for
the shares of Bank Niaga. This price will determine whether the
divestment must go on or be put off until a better time.

Then IBRA must also work hard to get the understanding of
lawmakers to ensure that both sides use the same parameters in
the divestment of companies whose shares are controlled by the
government.

-- Bisnis Indonesia, Jakarta