Singapore’s DBS Group Holdings yesterday announced plans to buy Indonesia’s PT Bank Danamon for S$9.1 billion (US$7.3 billion) to ramp up its business in Southeast Asia’s biggest economy.
DBS will pay S$6.2 billion for the 67.37 percent stake held by a subsidiary of Singapore’s state investment firm Temasek Holdings’ Fullerton Financial Holdings and will finance the purchase through the issuance of new stock.
DBS will also launch a cash offer of S$2.9 billion for the rest of the shares in the Indonesian commercial bank, which will be financed from internal cash resources and future debt issuances, DBS said in a statement.
Temasek will not be totally out of the picture after the share sale — it currently has a 29.5 percent stake in DBS and this will rise to slightly above 40 percent after the deal is completed, a DBS spokeswoman said.
The bank has been looking to grow its Asian business in recent years and the proposed acquisition of Danamon is its biggest deal since the 2001 purchase of Hong Kong’s Dao Heng Bank (道亨銀行) for S$10 billion.
DBS said the purchase, which it expects to complete in the second half of this year, would immediately create the fifth-largest lender in Indonesia.
“Indonesia is an exciting Asian market and we believe that we will be able to contribute towards the growth of the Indonesian banking sector,” DBS chief executive Piyush Gupta said in the statement.
DBS, the biggest bank in Southeast Asia by assets, in February reported net profit last year rose an annual 15 percent to a record S$3.04 billion as income hit a record high of S$7.63 billion.
“Indonesia is one of the least penetrated banking markets in the world,” Gupta said in a media teleconference from Jakarta after the deal was announced.
“It has got a big domestic consumption economy so you’ve got a good mass market opportunity ... It has got a growing middle class so you have good retail opportunity,” he said.
Henry Ho, president director of Danamon, said in a statement that the two banks “should be complementary in many ways.”
Danamon has a “proven ability in serving the under-penetrated mass market segment in Indonesia,” he said.
DBS said Danamon, a full-service bank, has about 3,000 branches and outlets with a customer base of 6 million in a country of 240 million people.
DBS will issue 439 million new shares at an issue price of S$14.07 to pay for Temasek’s 67.37 percent stake.
The Singapore bank also said its S$2.9 billion cash offer for the remaining PT Bank Danamon stock is the equivalent of 7,000 Indonesian rupiah per share to minority shareholders.
It represents a 56.3 percent premium over the Indonesian bank’s one-month volume weighted average price of 4,480 Indonesian rupiah per share.
“To me, it’s a fairly priced deal, but for anybody to come and top this price, they will really have to pay something over the top,” Gupta said during the media conference.