Mandiri sets pricing formula for BII acquisition

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)