OJK to Approve Foreign Majority Stake in Bank Danamon Indonesia?
Indonesia's Financial Services Authority (OJK), the government agency that regulates and supervises the country's financial services sector, may allow the plan of Japan-based Mitsubishi UFJ Financial Group (MUFG) to acquire a 73.8 percent stake in Indonesian financial institution Bank Danamon Indonesia through subsidiary The Bank of Tokyo Mitsubishi UFJ Ltd (BTMU).
Heru Kristiyana, Head of the OJK's Banking Supervisory Division, said the acquisition would be possible provided specific requirements are met.
Although a 2016 OJK regulation limits foreign ownership in an Indonesia-based bank to 40 percent, this general rule can be avoided in case the foreign investor acquires two Indonesian banks and merges both into one entity.
The Indonesian government encourages consolidation in Indonesia's banking industry as it improves the efficiency and stability of the nation's banking industry. Meanwhile, for the foreign investor it is more attractive to obtain a larger (or even a majority) stake in a lucrative industry, hence this exception from the general 40 percent foreign ownership cap is regarded a win-win situation for both the foreign investor and the Indonesian government as well as the national banking industry. Moreover, it is part of the government's "single presence policy", meaning that one investor cannot have a majority stake in more than one Indonesia-based bank.
MUFG has already acquired Indonesia-based financial institution Bank Nusantara Parahyangan. Therefore, it is now to merge this bank with Bank Danamon Indonesia to obtain a majority stake in the combined entity. However, it is expected that the merger will still require plenty of time and preparation. First there will be a second acquisition phase where BTMU will raise its ownership in Bank Danamon Indonesia to 40 percent.
In late-2017 MUFG had already acquired a 19.9 percent stake in Bank Danamon Indonesia through BTMU by purchasing 1.9 billion shares for a total price of USD $1.2 billion. Hence, in the second acquisition phase another 20.1 percent stake in Bank Danamon Indonesia will be purchased by BTMU.
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Update: on Tuesday 10 April 2018 Bank Danamon Indonesia's Corporate Communications officer Ferdi Ihdianto said the bank's extraordinary general shareholders' meeting - held on 20 March 2018 - approved the 40 percent share acquisition plan by BTMU. Bank Danamon is now in the process of seeking regulatory approval from the OJK for the 40 percent share acquisition.
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Shares of Bank Danamon Indonesia, listed on the Indonesia Stock Exchange, fell 1.09 percent to IDR 6,775 a piece on Tuesday (03/04). So far in 2018 the bank's shares have declined 2.52 percent. However, compared to one year ago, the company's shares are up 44.15 percent. This is due to a surge in the share price in late-December 2017 when BTMU announced that it entered into conditional share purchase agreements with Asia Financial (Indonesia) Pte Ltd and other affiliated entities to acquire their shareholding interests in Bank Danamon Indonesia
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