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Business deals

Indonesian banks draw deeper investment from Japanese megabanks

MUFG doubles Bank Danamon stake to 40% in $1.1bn deal

Jakarta-based Danamon is Indonesia's eighth-largest bank by assets.   © Reuters

JAKARTA -- MUFG Bank and Sumitomo Mitsui Banking Corp., two Japanese megabanks, are proceeding swiftly with plans to further integrate Indonesian banks into their businesses.

MUFG Bank announced on Friday that it has increased its investment in Bank Danamon Indonesia to 40.0% from its initial holding of 19.9%, after gaining approval from the Financial Services Authority of Indonesia, OJK.  It acquired the additional stake from Danamon shareholder Asia Financial Holdings and other affiliated entities for 17.1 trillion rupiah ($1.1 billion), or 8,921 rupiah per share.

This is the second phase of MUFG Bank's planned acquisition of Bank Danamon. Once it obtains further approval from Indonesian authorities, it will lift ownership to over 73.8%, with a tentative goal of converting Bank Danamon into a consolidated subsidiary in 2019. The overall value of the deal is expected to be around 700 billion yen ($6.27 billion), which looks to be the most a Japanese bank has spent on an overseas acquisition.

Indonesia usually caps single foreign ownership of lenders at 40%, but allows exceptions under certain conditions. Only a few domestic banks fall under foreign-majority ownership.

"The successful completion of Step 2...  is an important milestone and adds momentum to our ongoing efforts at exploring synergies together," Takayoshi Futae, MUFG Bank's regional executive for Asia, said in a statement. "[This] gives us further encouragement that MUFG Bank's commitment to contribute to the Indonesian economy is well-received by our stakeholders and regulators."

Meanwhile, SMBC's Indonesian unit and local lender Bank Tabungan Pensiunan Nasional, in which SMBC holds the biggest stake, on Thursday applied to the Financial Services Authority of Indonesia with plans to merge.

"This... is an important milestone, officially marking the commencement of the BTPN-SMBCI merger process," said Jerry Ng, president director of BTPN. "We believe this merger will give a positive impact, not only to the new bank, but also to our [Indonesian] national economy."

SMBC is looking to invest around 60% of the newly formed bank's capital, as well as supply several board members and make it a consolidated subsidiary. The Japanese bank said it was aiming to "complete a series of corporate actions for this purpose during the second half of fiscal 2018," which ends in March 2019. The new bank will rank 10th in the Indonesian banking industry, based on total assets.

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