Mon, 11 Nov 2002

IBRA sells 51% stake in Niaga to Malaysian firm

The Jakarta Post, Jakarta

After months of delay, the Indonesian Bank Restructuring Agency (IBRA) has sold the controlling 51 percent stake in Bank Niaga to one of Malaysia's leading financial conglomerates, Commerce Asset-Holding Berhad (CAHB).

In the deal signed on Friday evening, Commerce paid Rp 26.5 per share, which puts the value of the 51 percent stake at some Rp 1.05 trillion (about US$114 million).

The deal will mean more revenue for IBRA, which, as of October of this year, had secured Rp 40 trillion out of its 2002 revenue target of Rp 45.6 trillion.

Following the deal, the government's stake in Niaga dropped to 46 percent from 97 percent.

IBRA spokesman Raymond van Beekum told The Jakarta Post on Sunday that the contentious issue that dragged the negotiation of the bank's sale on until late Friday was the composition of the bank's board of commissioners and directors after Commerce became the majority shareholder.

Earlier, IBRA chairman Sjafruddin Temenggung said that Commerce demanded the right to appoint its own president director, who would then appoint the bank's board of directors. The Malaysian investors were also seeking the right to appoint the chief commissioner.

IBRA, on the other hand, wanted the appointment of the management to be based on Bank Niaga's shareholder composition.

Raymond said IBRA and Commerce had agreed to a four-three composition with Commerce taking four seats on the board, including the president director, while IBRA would take three, including two directors and one commissioner.

All details on the deal will be released on Monday, Raymond said.

Separately, Commerce called the deal a "groundbreaking development" for the Association of Southeast Asian Nations (ASEAN), in which Malaysia and Indonesia are members.

"It will enhance greater economic integration and interdependence among ASEAN members, especially with the onset of AFTA (ASEAN Free Trade Area).

"CAHB's acquisition of Niaga is expected to create one of the leading financial institution platforms both in Malaysia and Indonesia," said Rozali Mohamed Ali, director of Commerce and the CEO of Bumiputra-Commerce Bank, in a statement reported by Agence France Presse.

"With a strong platform and cultural affinities, the new franchise will be positioned to take advantage of future growth in the retail sector and consumer sectors as well as in inter- ASEAN trade flow," he said.

Commerce is the second largest banking group in Malaysia with a market capitalization of over US$2.2 billion and total group assets of almost $21 billion.

Niaga is the ninth largest bank in the country with assets of over $2.7 billion as of June 30 of this year.

IBRA owns a 97 percent stake in Niaga after the government injected the bank with recapitalization bonds to offset bad loans resulting from the 1997 economic crisis.

The agency has been trying to sell Niaga since early this year as part of a wider program under the International Monetary Fund's (IMF) economic reform package.

But the sale process has been delayed many times because the prices set by bidders for the bank were lower than the expectation of the government and the House of Representatives.

Commerce was selected from among the four bidders. The other bidders were a consortium led by Australia & New Zealand (ANZ) Banking Group Ltd., Bank Victoria International and the Batavia Investment Fund.

At the request of the House of Representatives, IBRA asked Commerce in September to increase its price to about Rp 30 per share, but the demand was rejected.

State Minister of State Enterprises Laksamana Sukardi has said that Commerce's price was "realistic", citing that the price is 1.48 times Niaga's book value. By comparison, IBRA sold the country's largest private bank, Bank Central Asia, at a share price that was 1.1 times of its book value.

Bank Niaga Sale's Chronology

May 25, 2000: House of Representatives okays $1.12 billion recapitalization plan for Bank Niaga.

Oct. 5, 2000: The government agrees with the House to delay the Niaga divestment program.

Feb.28, 2001: The House gives its approval for the government to divest its shares in Niaga in the first semester of 2001.

Feb.12, 2002: The Indonesian Bank Restructuring Agency (IBRA) launches the sale of a 51 percent stake in Niaga to strategic investors.

March. 20, 2002: IBRA announces that there are 19 investors which have expressed interest in purchasing the government's 51 percent stake in Niaga.

April 16, 2002: IBRA announces four short-listed bidders, which include a consortium led by Australia & New Zealand (ANZ) Banking Group Ltd., Malaysian financial group Commerce Asset-Holdings Berhad, Bank Victoria International and Batavia Investment Fund.

June 9, 2002: The sale of the 51 percent stake in Niaga to strategic investors is canceled because of low bidding prices.

June 11, 2002: IBRA says it will sell a 20 percent stake in Niaga on the stock market. PT Trimegah Securities is asked to carry out the sale on the stock market.

July 10, 2002: After selling a 0.4 percent stake, IBRA suspends the sale of Niaga shares on the stock market to prevent the price from dropping further.

July 23, 2002: IBRA announces that it will auction again a 51 percent stake in Niaga to strategic investors.

Aug. 24, 2002: IBRA says it has received bids from the four investors that participated in the first bidding. Commmerce offers the highest bid at Rp 26.5 per share.

Sept. 19, 2002: IBRA asks CAHB to raise its bid to about Rp 30 per share, but the request is rejected.

Nov. 8, 2002: IBRA signs the sales and purchase agreement with Commerce.