Trend Of Acquisition Of Local Banks By Large Foreign Investors

Merger illustration. (Photo: Pixabay)

JAKARTA - Recently, PT Bank Permata Tbk, divested its share ownership in PT Bank Permata Tbk to Bangkok Bank Public Company Limited. This is the number of times since there has recently been a trend of large foreign investors wanting to control ownership of banks in the country through acquisition and merger schemes.

Earlier this year, the second largest bank in Japan, Sumitomo Mitsui Banking Corporation officially owned 96.9 percent of shares in PT Bank Tabungan pensiunan Nasional Tbk or BTPN. The majority ownership was obtained after merging the business of PT Bank Sumitomo Mitsui Indonesia into a bank that focuses on the retired business.

Following its competitors, The Bank of Tokyo Mitsubishi UFJ also increased its share ownership in PT Bank Danamon Indonesia Tbk to reach 94 percent through a merger.

Apart from banks from Japan, financial institutions from South Korea have also recently entered Indonesia massively even though they are banks of a much smaller size. Most recently, Industrial Bank of Korea or IBK merged PT Bank Agris Tbk and PT Bank Mitraniaga Tbk. IBK now holds 95.79 percent of the merged banks which have now changed their name to PT Bank IBK Indonesia Tbk.

Previously, the South Korean-based financial company, APRO Financial, recently completed a merger between Bank Oke Indonesia and Bank Dinar. Before being acquired by APRO, Bank Oke Indonesia was Bank Andara. After the merger, APRO Financial controlled 91.33 percent of shares.

Acquisitions and mergers to control a majority of shares in banks in Indonesia were previously carried out by other South Korean investors, such as KEB Hana, Shinhan Bank, and Woori Bank.

Head of Research at PT Connection Kapital, Marolop Alfred Nainggolan assessed that the decision of PT Astra International Tbk and Standard Chartered Bank to release its share ownership in PT Bank Permata Tbk to Bangkok Bank Public Company Limited was positive for the banking industry because it made the Indonesian banking sector supported by large investors in world.

"The sale of Bank Permata's shares to Bangkok Bank has provided the financial sector, especially banking, with large capital support. Outside of state-owned banks, shareholders of large banks in Indonesia are the world's financial giants," said Marolop in Jakarta, Wednesday, December 18.

He added that the entry of Bangkok Bank would certainly encourage the consolidation process of Indonesian banking. This step is in line with the strategy of the Financial Services Authority (OJK) and is good for the national banking industry.

Furthermore, Marolop stated, with strong financial support, Bank Permata can accelerate its business stronger and is better prepared to compete in the increasingly tight financial industry today.

"The relationship between Bank Permata and the Astra Group which will be maintained after the acquisition will also be one of the strengthening factors for this bank in the future. Bangkok Bank with its experience certainly has a proven strategy. Moreover, Indonesian and Thai people have similar characteristics, "he said.

For information, the Bank from Negeri Gajah Putih agreed to acquire 89.12 percent of Bank Permata's shares, with a purchase value of Rp 37.43 trillion, 1.77 times the book value. The corporate action will be followed by a tender offer for the remaining shares, so that the total transaction value has the potential to be around Rp 42 trillion.

The company said the acquisition was carried out with the aim of strengthening the presence of Bangkok Bank in Indonesia, a country considered to have positive economic prospects.

In addition, the company wants to become a regional bank with a greater presence in ASEAN's key markets. Through this acquisition, the company also wants to seize new opportunities amid ASEAN economic and financial integration.

So far, the company has a presence in 14 countries, including Indonesia, although its status in Indonesia is only as a branch office. This acquisition step is also aimed at facilitating Thai companies in expanding overseas.

Thailand's investment in Indonesia is said to have increased 25 percent on an annual basis since 2008. Furthermore, this step is predicted to immediately increase the income per share (EPS) and the rate of return on capital (ROE) of Bangkok Bank.

President of Bangkok Bank Chartsiri Sophonpanich said he was optimistic that the banking business in Indonesia would continue to grow with healthy margins. This is based on operating experience in Indonesia so far. In particular, he saw that Bank Permata on a fairly large scale, namely as the 12th largest bank with assets in Indonesia, could support the company's goal of strengthening its position in the region.

"Permata offers a solid and large platform with capabilities that complement our strategic goals, including expanding distribution networks, strong retail brands, and advanced digital capabilities," he said.

The Bangkok Bank has stated its commitment to continue to support funding for businesses in the corporate and SME segments, including the agriculture and automotive sectors.

Bangkok Bank has signed a conditional share purchase agreement with Standard Chartered Bank and Astra International on Thursday, 12 December 2019. The company hopes that the purchase transaction of 89.12 percent of Bank Permata's shares can be carried out in 2020, followed by a mandatory tender offer for the remaining 10.88 percent of shares. .

A tender offer is an offer to buy shares of a company above market price with payment in cash, securities or both. A mandatory tender offer needs to be made in line with changes in the controlling shareholder.

Meanwhile, Bangkok Bank bought 89.12 per share of Bank Permata with a transaction value of IDR 37.43 trillion, for a price per share of IDR 1,498. Thus, for the acquisition of 100 percent shares at the same price, the transaction value is IDR 42 trillion.

To realize the acquisition, the company still has to get a series of approvals from related parties. This corporate action is still subject to several conditions, including approval from the Bank of Thailand and the Financial Services Authority, as well as a general meeting of shareholders.

Funding requirements for this acquisition will be drawn from internal sources and routine funding for the Bangkok Bank. The company is optimistic that capital will remain high after spending tens of trillions for this acquisition.