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Business deals

Bangkok Bank buys Indonesia's Bank Permata for $2.7bn

Thai lender outbids Japan's SMBC

Bangkok Bank is buying nearly 90% of Indonesia's Bank Permata.   © Reuters

BANGKOK -- Bangkok Bank said on Thursday it will pay 37.4 trillion rupiah ($2.67 billion) for an 89.12% stake in Indonesia's Bank Permata, marking the largest acquisition of a foreign financial institution by a Thai bank.

Bangkok Bank, Thailand's largest bank by assets, will buy a 44.56% stake held by London-based Standard Chartered Bank and another 44.56% stake from Jakarta-listed Astra International. The deal puts Permata at 1.77 times book value.

Potential Permata buyers had included majority state-owned Bank Mandiri, Indonesia's second-largest lender by assets, and Singaporean banks DBS Group and Oversea-Chinese Banking Corp. A senior official at OJK, Indonesia's Financial Services Authority, said last month that Japan's Sumitomo Mitsui Banking Corp. and a Thai investor were among the final bidders.

The deal "aligns with the bank's international strategy to transform into a leading regional bank with [a] larger presence in key ASEAN markets," according to a statement that Bangkok Bank filed with the Stock Exchange of Thailand on Thursday, referring to the 10 countries in the Association of Southeast Asian Nations. It "enhances cross-border capabilities for Thai corporates in their increasing overseas expansion needs," the statement said.

Thai companies have been expanding their operations across Southeast Asia, looking to benefit from the higher economic growth enjoyed by neighboring countries. Thailand's aging population leaves the country's banks increasingly keen to find new sources of income.

"Based on our firsthand experience in Indonesia and deep understanding of the banking sector, we believe that the Indonesian banking sector is poised to continue delivering attractive growth while maintaining healthy margins," Bangkok Bank President Chartsiri Sophonpanich told reporters in Jakarta. The bank opened its first Indonesian branch in 1968.

Another Bangkok Bank executive said that the strong Thai currency "helped, but it is not the main reason" for the acquisition.

Bangkok Bank Chairman Deja Tulananda said the acquisition will be funded from internal sources. The buyout statement said, "the bank does not expect to raise equity specifically for the purpose of funding this transaction."

Bangkok Bank Executive Director Charamporn Jotikasthira discusses the acquisition with reporters. (Photo by Masayuki Yuda)

Indonesia has been trying to restructure its banking sector -- which is dominated by small, uncompetitive institutions -- by encouraging mergers and acquisitions. Bangkok Bank's acquisition plan comes a day after Bank Central Asia, Indonesia's largest private lender, said it was acquiring the local unit of Dutch lender Rabobank.

In April, Japan's Mitsubishi UFJ Financial Group bought Bank Danamon, one of the larger lenders in Indonesia. Bank BTPN joined the group of Sumitomo Mitsui Banking Corp.

The sale of Bank Permata by Standard Chartered was part of the London-based bank's restructuring. CEO Bill Winters said in February that Standard Chartered would reposition retail operations in markets such as Indonesia, saying that its stake in Bank Permata was "noncore," hinting at a sale.

Foreign entities are allowed to own only a maximum of 40% in Indonesian banks but can increase their shares upon approval from OJK.

Buoyed by the acquisition news, Bank Permata's shares ended the day up 4.3% at 1,310 rupiah. Bangkok Bank's shares closed down 4.4% at 161.5 baht per share.

Bangkok Bank said it expects the transaction to conclude within 2020, after receiving regulatory approvals. Bangkok Bank will conduct a mandatory tender offer for the remaining 10.88% stake in Permata once the transaction is completed.

As of Oct. 31, Bangkok Bank had total assets of 3.09 trillion baht, followed by Siam Commercial Bank's 2.97 trillion baht and Krung Thai Bank's 2.90 trillion baht. According to FactSet, Bank Permata was the 11th-largest lender in Indonesia in 2018 by total assets, with 152.8 trillion rupiah.

Additional reporting by Shotaro Tani in Jakarta.

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