Sorak told to raise bid, or lose BII

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.