Sorak told to raise bid, or lose BII

The Jakarta Post Jakarta

The Indonesian Bank Restructuring Agency (IBRA) has named Sorak Financial Holdings Pte. Ltd., a South Korean-Singapore consortium, as the preferred bidder for a 51 percent stake in publicly listed Bank Internasional Indonesia (BII).

The agency, however, demanded the consortium to raise its bidding price or the offer would go to the competing Bank Panin consortium.

"... Sorak has been selected as the preferred bidder. But the agency still wants them to raise the (bidding) price and improve the sales and purchase agreement," IBRA chairman Syafruddin Temenggung told reporters on Tuesday.

Sorak has until Friday to resubmit its bid.

The Sorak and Panin consortia were the last two bidders to submit their final bids, at prices above the floor price set by IBRA. Another short-listed bidder, the United Overseas Bank of Singapore, had pulled out of the bidding.

Kookmin Bank of South Korea leads the Sorak consortium, which groups together Asia Financial Holdings -- a Singapore-based Temasek Holding unit, Malaysia-based ICB Financial Group Holdings and Barclays, a top lender in Britain.

The Panin consortium consists of local mid-sized Bank Panin, Austria's leading bank Raiffeinsen Zentralbank Osterreich and Fleur Enterprises, which is based in the British Virgin Islands.

Syafruddin said Sorak had actually offered a lower price than the Panin consortium, but it emerged the victor in the overall evaluation, which includes a review of the business plan and sales and purchasing agreement (SPA).

IBRA's remarks could cause another confusion in the sale process.

While pricing has been the priority criteria in determining a winner in the agency's sale programs, its decision in the BII sale might confirm some arguments that it prefers foreign investors than domestic investors, even if local investors offer a higher price than foreign investors.

The sales of Bank Niaga and Bank Lippo indicate the crucial factor the price plays in selecting the winning bidder.

Before its completion, the Niaga sale had to be canceled a number of times due to the low bidding prices. The most recent example is the Lippo divestment process, which had to be postponed until next year due to a similar reason.

BII was previously the financial arm of the powerful Sinar Mas conglomerate, but the bank collapsed during the economic and banking crisis of 1997-1998, prompting IBRA to recapitalize it along with other banks. IBRA has held a 93.7 percent stake in the bank since then.

Today, BII is one of the country's top 10 banks with assets worth more than Rp 36 trillion and a total of 1.1 million customers.

IBRA deputy chairman for bank restructuring I Nyoman Sender echoed Syafruddin: "If Sorak refuses to improve the price, then we'll declare the Panin consortium the winner, as long as they can accept the conditions in our SPA as is." He did not elaborate.

The agency had said on Monday that after the preferred bidder was selected, Bank Indonesia would conduct a fit and proper test on the winning consortium. Existing rulings requires the central bank to conduct the test on those wanting to own a controlling stake in an Indonesian bank.

IBRA has been selling banks over the last two years in an effort to restructure the banking sector and to generate proceeds to help cover the budget deficit, as well as to revive confidence in the national banking sector.

IBRA has so far sold three large local banks: Bank Central Asia (BCA), Bank Niaga and Bank Danamon. It also plans to sell the majority stake in other banks next year, such as Bank Permata, aside from reopening the Lippo sale.

In addition to raising cash for the state budget, the divestment of IBRA's stakes in national banks to new, credible investors is expected to help strengthen local banks.