Indonesia central bank puts DBS’ proposed Danamon acquistion on hold

Indonesia central bank puts DBS’ proposed Danamon acquistion on hold:
Indonesia’s central bank has put a proposed acquisition of Bank Danamon Indonesia by Singapore’s DBS Bank on the back burner until new rules on foreign ownership in banks are in place.
According to Agence France-Presse (AFP), it said Bank Indonesia wanted to re-evaluate a rule that allows private investors – be it local or foreign – to own up to 99% stake in Indonesian lenders.
“It’s not that we are delaying approval for the DBS deal, we will just start evaluating DBS’ plan after we issue our new bank ownership rules. Hopefully, the regulation will be issued by the end of May or early June,” Bank Indonesia spokesman Difi A Johansyah told AFP.
DBS Bank is the latest regional bank to want a presence in Indonesia due to its fast-growing middle-class and economy.
In early April, DBS announced that it would buy a 67.4 percent stake in the Indonesian lender for $4.9 billion, from Temasek Holdings, a Singapore state investor, at a steep 52 percent premium. DBS will also launch a $2.3 billion mandatory offer for the remaining shares of Danamon it did not own to gain full control of the bank.
The deal is Southeast Asia’s largest banking deal so far this year, beating a previous record set by recent deals such as Malaysia’s Malayan Banking that acquired Indonesia’s Bank Internasional Indonesia—also from Temasek Holdings—back in 2009.
When both DBS and Danamon announced the proposed deal in early April, some lawmakers in Indonesia were against the deal for nationalistic reasons.
Lawmakers also argued that foreign entry into Indonesia should be given based on a principle of reciprocity, whereby Indonesian lenders should also be given opportunities to set up shop or acquire other lenders in the region.
Several of Indonesia’s banks are already owned by foreign institutions, such as Bank Internasional Indonesia and Bank Niaga by Malaysia’s Malayan Banking and CIMB Bank, respectively.
Last year, there was talk that these Malaysian banks could be forced to sell their majority stakes in the Indonesian lenders due to increasing pressure and disapproval by Indonesian lawmakers on heavy foreign presence in the country’s banking industry. Indonesia’s central bank also froze takeover plans on local banks, and announced the possibility of capping majority shareholders’ interests in these lenders.
A Malaysian bank, Affin Holdings, last year pulled out from buying a small Indonesian lender due to the uncertainties surrounding foreign ownership of banks.
However, the plan was scrapped in February this year, as it would also affect local majority shareholders’ ownership in these lenders.