Niaga sale likely to be canceled due to low bids

Dadan Wijaksana, The Jakarta Post, Jakarta

The government is likely to cancel the disposal of its 51 percent stake in medium-sized Bank Niaga to strategic investors due to low bidding prices submitted by the bidders, State Minister of State Enterprises Laksamana Sukardi indicated on Wednesday.

Laksamana, however, said that the final decision on the high profile sale plan would be decided by the Financial Sector Policy Committee (FSPC) in a meeting scheduled for Thursday.

"I personally think that if the offered prices are considered far below the market price, it's better (for the strategic sale) to be canceled," he said.

Laksamana, together with other economic ministers, are members of the FSPC, which has the final say on the government's major asset sale program.

Asked about his personal view on the prices submitted by the current bidders, whether they were too low, Laksamana simply said:" Yes ..more or less".

Laksamana had earlier said that if the sale to strategic investors was canceled, the government would sell the bank shares via other mechanisms including a private placement.

There are currently two consortia vying for a controlling stake in the publicly listed Bank Niaga, each led by Malaysia's Commerce Asset Holding Bhd. and ANZ Banking Group Ltd.

The two bidders submitted their final bids on Monday.

The government has so far declined to disclose the price of the bids it received, but rumor has it that the highest bid was made by Commerce at around Rp 30 per share or some $130 million for a 51 percent stake, given that Bank Niaga has 78 billion total shares outstanding.

In comparison, Bank Niaga shares were trading at around Rp 75 per share on Wednesday.

The government, through the Indonesian Bank Restructuring Agency (IBRA), owns a 97.15 percent stake in Bank Niaga. It took over and recapitalized the bank in the late 1990s after no shareholders of the bank were willing to spend their money to help finance the bank's recapitalization program.

The divestment of the Bank Niaga stake is part of the government's asset sale program for this year to raise cash to help finance the 2002 state budget deficit.

The International Monetary Fund has insisted the government should not delay the sale program.

Any delay in the asset sale program would not only hamper IBRA's efforts to raise more than Rp 35 trillion in cash this year, but would also hurt sentiment in the rupiah, which has been gaining ground lately.

News about the possible cancellation in the Bank Niaga sale had caused the rupiah to decline from its intraday high on Wednesday, although the unit still managed to end up slightly higher at Rp 8,850 per U.S. dollar from Rp 8,870 at Tuesday's close.

The rupiah has been in a bullish run recently amid hopes of more dollars entering the country from the sale of various government assets.

However, the hardest part of the cancellation would be to convince investors that the country is still committed to its economic reform program.

Confidence in the country's commitment on reform has been high following the sale of Bank Central Asia (BCA) to U.S.-based investment firm Farallon Capital last March.