DBS to test Indonesian openness with $7.2 billion takeover

Mon Apr 2, 2012 8:12am EDT
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By Saeed Azhar and Neil Chatterjee

SINGAPORE/JAKARTA (Reuters) - Singapore's DBS Group (DBSM.SI: Quote), Southeast Asia's biggest bank, is to buy Indonesia's Bank Danamon (BDMN.JK: Quote) for $7.24 billion, in a deal that could stir nationalist opposition stoked by anxious local rivals.

DBS, part-owned by Singapore sovereign investment arm Temasek Holdings TEM.UL, said on Monday it agreed to take over Danamon in a cash-and-shares transaction that would rank as Asia's fourth-largest banking deal.

Temasek is on both sides of the transaction as it also owns 67.4 percent of Danamon, and has had additional exposure to Indonesia through the DBS franchise there.

If the deal is approved, Temasek will be invested in a single bank in Indonesia, rather than two - something that should please government officials in Jakarta, sources familiar with the deal said.

But Indonesia's biggest foreign takeover could become a test of its openness to overseas capital, a month after Jakarta moved to curb foreign ownership of mines and less than a year since it voiced concerns over foreign bank holdings.

It could also trigger more foreign bank takeovers, with shares in Bank Panin Indonesia (PNBN.JK: Quote) jumping 6 percent on Monday on bets that it, too, could become a target.

However, some Indonesian bankers said they would try to block the deal and were considering a media campaign targeting public opinion in the hope of influencing politicians. Local rivals face stiffer competition from expanding foreign banks.

"You're going to see some movements to halt this deal in the coming days," said a senior executive of a rival local bank, who asked not to be named because of what he called the sensitivity of the issue.   Continued...

People walk in the lobby of a DBS Bank building in Singapore, in this November 7, 2008 file picture. REUTERS/Vivek Prakash/Files