House paves way for Bank Niaga sale to proceed

House paves way for Bank Niaga sale to proceed

The Jakarta Post, Jakarta

Legislators agreed on Wednesday to let the government proceed
with the sale of Bank Niaga, bringing down the last hurdle in the
sale after their initial demand for a higher price was rejected
by the final bidder Malaysia's Commerce Asset Holding Bhd.

House of Representatives Commission IX for financial affairs
said Bank Niaga's sale should go ahead if the Indonesian Bank
Restructuring Agency (IBRA) felt that getting a better price was
unlikely.

"We'll leave the price up to the government," Commission IX
chairman Max Moein was quoted as saying by Antara, following a
meeting with a House team for Bank Niaga's divestment.

Max added that IBRA might need to explain to the House why it
had thought Commerce's price was optimal. "Our role is to
control, not sell banks."

The House's decision has cleared the way for the government to
divest a 51 percent stake in publicly listed Bank Niaga at Rp
1.05 trillion (about US$166 million) or Rp 26.5 a share.

Earlier, legislators demanded that IBRA sell Niaga at twice
the price of the bank's book value of between Rp 15 and Rp 17 a
share.

But as the submitted bids turned out to be lower, they asked
IBRA to negotiate upwards on Commerce's offer. It meant that even
after the bidding process was finalized and Commerce declared the
surviving bidder, IBRA had to ask the Malaysian investor to raise
its price range from Rp 30 to Rp 35 a share.

Commerce is the only bidder out of the four making the highest
offers at Rp 26.5 a share or about 1.5 to 1.7 of its book value.

By comparison, IBRA sold the country's largest private bank,
Bank Central Asia (BCA), at a share price of 1.1 of its book
value, said IBRA chairman Syafruddin Temenggung.

IBRA deputy chairman I Nyoman Sender said earlier that getting
Commerce to pay more after it had won the bid would be difficult.

Previous bank sales, he said, earned IBRA proceeds of just 1.2
to 1.5 of the bank's book value. "Bank Niaga is not exactly a
super bank or anything," he said.

State Minister of State Enterprises Laksamana Sukardi has
called Commerce's offer a realistic one, and said a better price
was hard to expect.

In the absence of strong arguments to push for a better price
IBRA's oversight committee further warned that engaging Commerce
into negotiations violated tender procedures under which Bank
Niaga was being sold.

"A tender is a tender, and we should stick to that once we've
decided that we are doing it by tender," said committee chairman
Mar'ie Muhammad in a hearing with legislators last week.

On Monday, Commerce turned down IBRA's request, insisting that
its offer was final.

Legislators canceled IBRA's first attempt to auction off
Niaga's shares through the stock market in June, citing too low
share prices at the time.

Their influence in the sale highlights the difficulty in which
the government needs to meet asset sales targets as mandated by
the International Monetary Fund's (IMF) economic recovery
program, better known as the Letter of Intent (LoI).

Although the legislature has no say on any of the asset sales,
it does hold enough political sway to hold them back.

Legislators prompting IBRA to delay the sale of BCA and other
government policy missteps in 2000 had led the IMF to freeze its
aid program to Indonesia for eight months.

"We didn't consider delaying or canceling the sale, I think we
are all clear on this to go ahead with Niaga's divestment," said
Syafruddin.

But the House's agreement comes less than a week after weekly
Tempo magazine reported that several legislators had taken bribes
from IBRA to smooth out Bank Niaga's sale.