By: Vincent Low/
It was reported yesterday, 27 Dec, that Temasek Holdings is selling its entire stake of 73.8% in Indonesia’s Bank Danamon to Japan’s largest lender Mitsubishi UFJ Financial Group (MUFG).
Temasek will sell Danamon shares to MUFG in 3 parts. The initial stake of 19.9% will be sold to MUFG at 8,323 Indonesian rupiah apiece (USD0.61).
However, MUFG will seek further regulatory approvals to buy the next 20.1% so as to raise its stake to 40%.
Finally, it will need to seek further approvals to lift its stake beyond the 40% ceiling, as Indonesia restricts single ownership in banks to 40%.
Temasek tried to sell Danamon to DBS before
Five years ago in 2012, Temasek tried to sell its stake to DBS.
At the time, DBS said it would buy the 67.4% stake in Danamon from Temasek. It was willing to make a general offer for Danamon shares at 7,000 rupiah (USD0.76) each. At this price, it was already at a 52% premium to Danamon’s share price trading at around 4,600 rupiah (USD0.50) then.
However, a year later (2013), DBS abandoned the deal altogether.
This was because Indonesia decided to change its laws to put a 40% cap on single ownership of its banks, making it difficult for DBS to acquire Danamon.
Indonesia, however, can “relax” the 40% ceiling on special grounds but DBS decided not to pursue this. MUFG on the other hand, would pursue with Indonesian authorities to waive the 40% ceiling rule so that it can acquire Danamon successfully.
Rupiah continues to depreciate
Even though the price of 8,323 rupiah offer to MUFG by Temasek to acquire Danamon is higher than the one (7,000 rupiah) offer to DBS five years ago, because rupiah keeps depreciating, the price offered to MUFG in USD is actually much lower.
As can be seen in this graph, rupiah has been depreciating in value for many years:
So, anyone investing in Indonesia will have to take into consideration of exchange losses especially in Indonesia.
In any case, it’s not known at what price (in USD) that Temasek acquired Danamon from the Indonesian govt in 2003. At the time, the Indonesian government was in a budget deficit crisis and was desperately selling off its national assets to raise cash. Temasek became the white knight.