Jakarta. Mitsubishi UFJ Financial Group, or MUFG, Japan's largest financial group, seeks to buy a 73.8 percent stake in Bank Danamon Indonesia from Singapore's wealth fund Temasek, in an attempt to strengthen its foothold in Southeast Asia's largest economy.
MUFG has signed a conditional purchase agreement with Asia Financial, a wholly owned subsidiary of Temasek's Fullerton Financial Holdings that owns the majority stake in Bank Danamon, Indonesia's seventh largest lender by assets, the company said in a statement on Tuesday (26/12).
"As one of the leading banks in Asia and Oceania, we have long recognized Indonesia's role as one of the key drivers of the region's development and have sought to establish a stronger presence in the country," Takayoshi Futae, MUFG chief executive for Asia and Oceania, said in the statement.
"Danamon is a well-respected institution in the local banking sector, renowned for its experienced and capable management team, sound business platform and profitable franchise, and would make a very welcome and strategic addition to the MUFG group as we press on with our regional strategy," Futae said.
Under the plan, MUFG will first spend Rp 15.9 trillion ($1.2 billion) to buy 19.9 percent of Danamon shares in the next few days at Rp 8,323 apiece – twice Danamon's book value, representing a 39 percent premium over the lender's closing price at the Indonesia Stock Exchange (IDX) last week.
The Japanese lender will then seek approval from the authorities to buy another 20.1 percent of the shares. MUFG expects to conclude the purchase by the end of September.
Indonesia allows single ownership in domestic banks at 40 percent, with exception granted in special cases – if the acquiring party is strong financially and willing to develop Indonesia's economy.
In the final step, MUFG will seek to buy the remaining 33.8 percent of the shares from Fullerton Financial Holdings.
MUFG will also conduct a tender offer in accordance with the regulations to provide opportunity for public shareholders to cash in their holdings.
"With a strong Indonesian franchise for corporate lending and infrastructure financing, MUFG is well positioned to complement Danamon's franchise and lead the bank forward into its next phase of growth," Temasek Holdings president Tan Chong Lee said in separate statement.
"We believe that MUFG's interest in Danamon is testament to their confidence in the bank and that the combination will also be well aligned with Indonesia's development and growth objectives," Tan said.
In 2013 Singapore's DBS Group dropped its bid to acquire Danamon, when Bank Indonesia changed ownership rules and imposed the ownership percentage cap.