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.