Farallon completes first payment for BCA shares

Farallon completes first payment for BCA shares

Dadan Wijaksana, The Jakarta Post, Jakarta

A consortium led by U.S. investment firm Farallon Capital
Management completed on Thursday the first stage of payment for
acquiring the government's 51 percent stake in Bank Central Asia
(BCA).

Indonesian Bank Restructuring Agency (IBRA) deputy chairman
Soebowo Musa said that Farallon paid US$320.7 million for the
first 30 percent stake in BCA, the country's largest retail bank.

He said that for the remaining payment, Farallon would have
until December 31 to complete it saying the payment could be made
in both the rupiah or American dollar.

Based on an exchange rate of Rp 9,905 to the dollar, the
government expects to receive some Rp 5.3 trillion from the BCA
sale.

"At the moment, BCA shares have been handed over to Farallon,"
Soebowo said.

The government nationalized BCA through IBRA in the wake of
the 1997 regional financial crisis. Under an economic reform
program sponsored by the International Monetary Fund, the
government must gradually divest its ownership in BCA as well as
in other nationalized and recapitalized banks, not only to raise
cash to help plug the state budget deficit, but also to
accelerate the recovery of the banking sector and to help revive
investors confidence.

Farallon becomes the new owner of BCA after beating Standard
Chartered Bank Plc during the last round of a bidding process.
StanChart had been previously tipped to win the bid mainly
because of its strong experience in banking.

Nevertheless, the market has been reacting positively to the
completion of the sale process with analysts believing it has
been the prime factor in this week's surge in the rupiah.

The stock market has also benefited from the relatively
controversy-free process, as evidenced in the steady upward
movement of its Composite Index.

However, the BCA divestment has also drawn opposition from
part of its employees who fear the change of ownership will lead
to major shake-ups in the bank, including massive lay-offs.

Brushing aside such concerns, Soebowo guaranteed that there is
no plans for massive lay-offs in the first two years, as stated
in the Sales and Purchase Agreement (SPA).

"This does not necessary mean that they will immediately
dismiss employees after two years," Soebowo added without
elaborating.

Meanwhile, the government has placed Bank Niaga on its next
divestment list in a process scheduled to be concluded in June.

Other banks to be followed include Bank Danamon, Bank
Internasional Indonesia (BII) and the bank resulting from the
planned merger of five banks under the supervision of IBRA.

The five are, Bank Bali, Bank Patriot, Bank Artha Media, Bank
Universal and Bank Prima Express.