Temasek, Deutsche Bank consortium wins Danamon stake

M. Taufiqurrahman and Dadan Wijaksana, The Jakarta Post, Jakarta

A consortium of Temasek Holdings Pte. Ltd. and Deutsche Bank is set to become the new owner of Bank Danamon after it won an auction on Monday for a 51 percent stake in the bank.

Temasek Holdings is an investment subsidiary of the Singapore government.

Chairman of the Indonesian Bank Restructuring Agency (IBRA) Syafruddin Temenggung said that the consortium, called Asia Financial Indonesia, made a price offer of Rp 1,202 (14 U.S. cents) per share, compared to the agency's floor price of Rp 1,160 per share.

Syafruddin said the consortium would have to undergo a two- week fit and proper test by the central bank before it officially becomes the new owner of publicly listed Bank Danamon, which is one of the country's top ten banks.

"If IBRA agrees with the fit and proper test from the central bank, the consortium will then be designated as the new owner of the bank, following a sale and purchase agreement," he said.

Based on the offered price, IBRA estimates that the 51 percent stake could generate about Rp 3 trillion in proceeds, Syafruddin said.

The agency is hoping to raise a total of $500 million selling the Bank Danamon stake. Syafruddin said IBRA planned to immediately sell another 20 percent stake through the stock market.

The cash-strapped government has said the proceeds would go into the government's coffers to be used partly to cover this year's state budget deficit, estimated at Rp 34.4 trillion, or 1.8 percent of the country's gross domestic product (GDP).

What's more important, however, is the smooth-going of the sale process, which should send positive signals to foreign investors that the country is committed to economic reform programs.

Selling local banks such as Danamon to credible foreign investors should also fit in perfectly with the government's efforts to restructure the country's troubled banking sector, which is still feeling the pinch of the late 1990s economic crisis.

Last year, the government sold Bank Central Asia and Bank Niaga for the same reasons.

Danamon's shares closed on Monday 5.5 percent lower at Rp 1,300, before IBRA's announcement.

The government, through IBRA, owns 99.36 percent of Danamon.

IBRA took over Bank Danamon in the late 1990s after bailing the bank out at a huge cost of Rp 47 trillion. The bank was previously owned by tycoon Usman Admadjaja.

The Temasek-Deutsche Bank consortium beat a local consortium of Bank Mega and PT Bhakti Capital Indonesia. Another consortium, led by Ban Artha Graha, did not submit its final bid.

The new Temasek investment marks the growing role of Singapore government-linked companies in the Indonesian corporate sector.

Singapore Technologies Telemedia Pte. Ltd. acquired a 49 percent stake in the state-owned telecommunications firm PT Indosat late last year.

Singapore Telecommunications Ltd., the city state's biggest phone company, owns a 35 percent stake in Indonesia's largest mobile phone company PT Telkomsel.

Temasek spokeswoman Eva Ho told Dow Jones that the Singaporean investment company has a 85 percent share of the joint venture with Deutsche Bank, which made the bid for Bank Danamon.

Financial Performance

-------------------------------------------------- Indicator As of March, 2003 -------------------------------------------------- Net Profit Rp 269.7 billion Gross Income Rp 1.9 trillion Liabilities Rp 42.3 trillion Total Assets Rp 47.2 trillion Book Value (per share) Rp 1,003 --------------------------------------------------- Source: Danamon's quarterly financial report