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Indonesia's Bank Danamon shares soar on talks of MUFG stake

Singaporean wealth fund Temasek to revive sale years after failed DBS bid

  © Reuters

JAKARTA -- Shares of Bank Danamon Indonesia hit their highest level in more than four years on Thursday after the Nikkei reported that Japan's Bank of Tokyo-Mitsubishi UFJ is eyeing a 40% stake for around 200 billion yen ($1.76 billion).

Bank Danamon's stock price closed at 5,725 rupiah, up 18% from the previous day and its highest level since July 2013. The jump gave it a market capitalization of 46.44 trillion rupiah ($3.43 billion), still below its theoretical valuation based on MUFJ's potential acquisition price.

On Thursday, the Nikkei reported that the board of the Mitsubishi UFJ Financial Group unit decided to begin negotiations with Danamon and Singaporean state wealth fund Temasek Holdings, as well as with local authorities. MUFG is seeking to turn Danamon into an equity-method affiliate as early as mid-2018, with an eye toward a future majority stake, according to the report.

In a stock-exchange filing on Thursday, Danamon said Asia Financial (Indonesia), a unit of Temasek that holds a 67% stake in Danamon, received an "expression of interest" in respect to its ownership in the bank.

"We understand that such interest still depends on the outcome of further negotiations and may not necessarily result in binding agreements," it added.

  © Reuters

Bank Danamon is Indonesia's eighth-largest bank by assets. It runs both retail and corporate banking businesses, and is known for its strength in micro loans. However, the bank has been trying to shift to larger corporate and retail banking amid intensifying competition with state-owned banks, according to local analysts. It reported a net profit of 3.0 trillion rupiah for the first nine months of 2017, a 21% increase from a year earlier.

The sale would mark the first significant effort by Temasek to unload its stake in Bank Danamon since 2013, when talks to sell its stake to Singapore's DBS Group Holdings in a $7.1 billion deal collapsed due to regulatory challenges. Bank Indonesia, the central bank, issued new regulations that capped foreign ownership in local banks at 40%, although the stake can be increased under certain conditions.

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