House OK's Bank Lippo divestment

House OK's Bank Lippo divestment

Dadan Wijaksana, The Jakarta Post, Jakarta

The House of Representatives approved on Tuesday the government's
plan to sell a majority stake in publicly listed Bank Lippo.

The approval was given during a meeting between House
Commission IX for financial affairs and Minister of Finance
Boediono and State Minister for State Enterprises Laksamana
Sukardi.

The government had hoped the House also would approve its
plans to sell a majority stake in Bank International Indonesia
(BII) and to privatize state Bank Rakyat Indonesia (BRI) through
an initial public offering, but lawmakers said they needed more
time to study the proposals.

The Indonesian Bank Restructuring Agency (IBRA), which holds a
54.9 percent stake in Bank Lippo, plans to start the divestment
process in the second week of this month, and expects it to be
completed in October.

IBRA deputy chairman I Nyoman Sender said the Lippo shares
would be sold at between 1.1 to 1.4 times book value.

As of the end of March, Bank Lippo's book value was about Rp
597 per share, according to one estimate.

The agency in May sold a majority stake in Bank Danamon to a
consortium led by Singapore's Temasek Holdings at a price of 1.7
times the book value. And earlier this month, the government sold
about 20 percent of Bank Mandiri at 1.07 times book value.

IBRA has not yet disclosed the mechanism for the divestment of
the Bank Lippo shares, nor the size of the sale. But Bank Lippo
president Joseph Luhukay indicated on Tuesday the agency might
sell about a 51 percent stake.

Public investors currently hold about 35.5 percent of Bank
Lippo shares and PT Lippo E-Net holds about a 9.6 percent stake.

The government, through IBRA, became the majority owner in
several banks after injecting massive amounts of bailout funds
into the banks in the wake of the late 1990s financial crisis.

IBRA's job is to nurse the banks back to health and then
return them to private hands through a divestment process.

Proceeds from the sale of the bank shares, and the sale of
other assets controlled by IBRA, help finance the state budget
deficit.

This year, IBRA hopes to raise Rp 18 trillion in cash and Rp 8
trillion in bonds from the sale of assets. So far it has raised
Rp 7 trillion in cash and Rp 3 trillion in bonds.

IBRA plans to begin selling a 70 percent stake in BII in
August and hopes to complete the process in November.

As of May 2003, IBRA holds 93.7 percent of BII, with the
remainder owned by the public.

Aside from Lippo and BII, IBRA also has Bank Permata on its
divestment list, although the agency has said the sale is not
likely to take place this year.