DBS Group Holdings Ltd. (DBS), Southeast Asia’s biggest bank, will buy control of PT Bank Danamon Indonesia (BDMN) for about $4.9 billion to tap a market growing at the fastest pace since before the Asian financial crisis.

DBS will pay Temasek Holdings Pte (TMSK) for 45.2 trillion rupiah ($4.9 billion) for its 67 percent stake and plans a bid to buy the rest of the lender, the Singapore-based bank said in a statement to the Singapore stock exchange.

 

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The DBS Group Holdings Ltd. logo is displayed atop the company's DBS Asia Hub building in Singapore. Photographer: Munshi Ahmed/Bloomberg

 

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April 2 (Bloomberg) -- DBS Group Holdings Ltd., Southeast Asia’s biggest bank, said it will pay Temasek Holdings Pte 45.2 trillion rupiah ($4.9 billion) for its 67 percent stake in PT Bank Danamon Indonesia and plans a takeover bid for the lender. Haslinda Amin reports from Singapore on Bloomberg Television's "First Up." (Source: Bloomberg)

 

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Piyush Gupta, chief executive officer of DBS Group Holdings Ltd. Photographer: Munshi Ahmed/Bloomberg

DBS is seeking to tap Danamon’s 3,000-branch network,Indonesia’s second largest, serving 6 million customers. The country’s economy, Southeast Asia’s biggest, grew 6.46 percent last year, the fastest pace since before the 1997-98 Asian financial crisis, as rising investment and domestic spending countered a slowdown in export demand. The target for 2012 is 6.5 percent.

The deal will allow DBS “to expand in an important high- growth emerging market,” Jonathan Koh, an analyst at UOB Kay Hian in Singapore, wrote in a note. DBS could “add value by building up Bank Danamon’s corporate banking, investment banking and treasury businesses,” he said.

DBS, whose controlling shareholder is Temasek, said it will issue 439 million new shares at S$14.07 apiece for the purchase. DBS shares, suspended from trading for the announcement, last traded at S$14.18 on March 30. The transaction is the largest banking takeover in Southeast Asia since June 2001, according to data compiled by Bloomberg.

Takeover Premium

DBS bank will offer to buy the remaining shares at 7,000 rupiah each, a 52 percent premium from Danamon’s closing price of 4,600 rupiah on March 30. That amounts to 2.62 times Danamon’s book value, higher than the median of 2.2 for deals worth more than $1 billion in the global banking industry over the past five years, according to data compiled by Bloomberg.

The Singapore bank said the acquisition would cost about 66.4 trillion rupiah if all Danamon shareholders accepted the offer, which it also valued at 2.6 times book value. DBS will pay the remaining shareholders in cash, estimated at 21.2 trillion rupiah, from its own funds and debt, it said.

The transaction would be DBS’s biggest purchase of a majority stake in a company since its takeover of Dao Heng Bank Group Ltd. in Hong Kong announced April 2001. In that deal it paid 3.33 times book value, according to Bloomberg data.

‘Exciting Asian Market’

“Indonesia is an exciting Asian market and we believe that we will be able to contribute towards the growth of the Indonesian banking sector, especially in areas such as infrastructure financing, project financing, trade finance and syariah banking,” DBS Chief Executive OfficerPiyush Gupta said in the statement. “With Danamon, we will be able to significantly diversify our revenue mix.”

DBS said in a slide presentation today that its 2011 revenue from South and Southeast Asia would have increased to 27 percent from 7 percent with Danamon, while its reliance on Singapore would decline to 49 percent from 62 percent.

Temasek’s banking unit Fullerton Financial Holdings Pte, which holds the stake in Danamon, Indonesia’s sixth-biggest bank by assets, said in a March 30 statement it received an offer for its shares, without disclosing the bidder.

In June 2003, Temasek and Deutsche Bank AG (DBK), Germany’s biggest bank, through Asia Financial Indonesia, paid 3.08 trillion rupiah for a 51 percent stake in Danamon. Asia Financial now owns 67 percent of the bank, according to data compiled by Bloomberg.

Temasek managed S$193 billion ($154 billion) in the year ended March 2011, according to its website. Its unit Fullerton Financial said it appointed Bank of America Corp.’s unit Merrill Lynch and UBS AG as advisers for the offer. It also obtained a waiver from having to make a takeover bid for DBS.

Asian investments made up 77 percent of Temasek’s underlying portfolio in 2011, the website showed. The percentage of financial services in Temasek’s portfolio rose to 36 percent from 35 percent as of March 2011, according to the company.

To contact the reporters on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Sanat Vallikappen in Singapore at vallikappen@bloomberg.net

To contact the editor responsible for this story: Russell Ward at rward16@bloomberg.net

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