Jakarta. The country's Financial Services Authority, or OJK, encouraged Mitsubishi UFJ Financial Group to merge its affiliated companies in Indonesia into one single entity to boost business potential after Japan's largest financial group announced completion of the first phase of an acquisition in a local lender, the OJK chairman said.
MUFG completed the first phase of the acquisition on Friday (29/12) after it successfully took over a 19.9 percent stake in Bank Danamon, Indonesia's seven largest lender, through $1.2 billion worth of transactions.
The financial group plans to take a majority control - about 73.8 percent - in the Jakarta-listed lender from Singapore's state investment arm Temasek through three phases of corporate actions, the lender announced on Dec. 26.
Aside from owning Bank Danamon, MUFG also owns a majority stake in another Jakarta-listed lender, Bank Nusantara Parahyangan (BNP), through its subsidiary and Japan's largest consumer loan company Acom.
Meanwhile, MUFG also controls Japan's largest lender Bank of Tokyo Mitsubishi UFJ (BTMU), which has local branches in Jakarta and Surabaya (East Java) and several service points.
"If there are such corporate actions, companies should merge their affiliated companies. We encourage banks to be more competitive as the competition is getting tougher amid the growing services from fintech companies," OJK chairman Wimboh Santoso told reporters on Friday (29/12), referring to MUFG's acquisition of Bank Danamon.
In the past, OJK has encouraged Indonesian small-size banks to merge among themselves or to seek acquisitions by bigger lenders to operate more efficiently.
OJK sets regulations for lenders to comply with the country's single-presence policy that limits shareholders to hold a majority stake in one bank. The regulator has set a 40 percent ownership cap for a financial institution, be it a foreign or local one, to own a locally incorporated lender.
However, special cases are allowed and granted - if the acquiring party is strong financially.
In the second phase of acquisition, MUFG will takeover 20.01 percent of Bank Danamon before taking over the 33.8 percent remaining from Temasek's affiliate Fullerton Financial Holdings.
Samsul Hidayat, a listing director at the Indonesia Stock Exchange (IDX), said on Thursday that if MUFG merges all of its affiliated lenders - BNP and BTMU - and appointed Bank Danamon as the surviving entity or holder of these lenders, BNP should delist its shares on the bourse.
That means BNP and BTMU will have to integrate all of their assets and operations under the surviving entity.
"However, BNP does not need to conduct a tender offer as the shareholders' will be integrated under Bank Danamon," Samsul said.