Mandiri sets pricing formula for BII acquisition BERNI K. MUSTAFA The Jakarta Post Jakarta
State owned Bank Mandiri said on Thursday the acquisition price of Bank Internasional Indonesia (BII) depended on how much capital the latter needed to meet the minimum required capital adequacy ratio (CAR) of eight percent.
Bank Mandiri president E.C.W Neloe said his bank would pay for BII at a value that would bring BII's CAR to eight percent.
"We haven't start discussion on the price....first we try to find out what it takes to get to an eight percent CAR," he told reporters.
BII's total capital, he said, would reflect the bank's book value on which Bank Mandiri would negotiate a price for.
"If for instance, BII needs a (total) capital of Rp 1 trillion (about US$103.25 million), and the price is 1.3 times its book value, we should pay Rp 1.3 trillion for the bank," he explained.
Bank Mandiri is preparing to acquire BII, which runs at risk of falling short with meeting the eight percent CAR level.
CAR measures a bank's capital against its risked weighted assets, which include loans.
Bank Indonesia threatens to liquidate banks unable to meet the minimum 8 percent CAR level by the end of this year.
Almost half of BII's loans have been channeled to the heavily indebted Sinar Mas Group. The Group is close to defaulting its debts after its subsidiary, Asia Pulp & Paper (APP), declared a payment standstill on debts worth $13 billion.
Under the acquisition plan of BII, the government will take over Sinar Mas loans and replace them with government bonds.
BII is 56.78 percent owned by the government, 17.86 percent by the Sinar Mas Group, and 25.36 percent by the public.
Neloe said he planned to complete BII's acquisition by late October, after Bank Mandiri recently concluded a due diligence on the bank.
Right now, he said, Bank Mandiri was matching the due diligence results with data owned by the government and BII.
He also insisted to fund the purchase using recapitalization bonds instead of funds from Bank Mandiri's own operation.(bkm)