Divestment price of Bank Niaga

Divestment price of Bank Niaga

The plan of the Indonesian Bank Restructuring Agency (IBRA) to divest the government's shares in PT Bank Niaga Tbk will again have to be postponed because the prospective investor, Malaysia's Commerce Asset Bhd and Indonesia's House of People's Representatives, whose approval IBRA must have 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 really ideal: it does not produce asymmetric information; it is free from monopoly and dominant market power and it is governed by impartial government policies. Unfortunately, the Indonesian capital market is still far from this ideal state. Relying on the market price in a divestment process is therefore really 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 till a better time.

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

-- Bisnis Indonesia, Jakarta