DBS Group Holdings Ltd. (DBS) fell the most in six months after Southeast Asia’s largest lender offered to buy PT Bank Danamon Indonesia (BDMN) for about $7.2 billion yesterday in the region’s biggest banking deal.

Shares of the Singapore-based bank slid as much as 3.9 percent, the biggest intraday decline since Oct. 4, to S$13.63. They traded 2.4 percent lower at 9:19 a.m. local time after being suspended yesterday when the offer was announced. The benchmark Straits Times Index (FSSTI) rose 0.5 percent.

DBS, controlled by Singapore’s state-run Temasek Holdings Pte (TMSK), said it will pay its parent 45.2 trillion rupiah ($4.9 billion) in new shares for its 67 percent stake in Danamon and buy the remaining stock from others for 21.2 trillion rupiah in cash. The offer for these shares, at 7,000 rupiah each, is at a 52 percent premium from Danamon’s 4,600 rupiah close on March 30.

“Investors who don’t want to deal with the immediate complexities of the deal may want to move out,” said Anand Pathmakanthan, an analyst at Nomura Singapore Ltd. He predicted a downward move of at least 5 percent before trading started.

The deal will help DBS branch out from Singapore and Hong Kong and tap Indonesia’s economy, which last year grew at the fastest pace since before the Asian financial crisis. Trade and infrastructure project finance as well as corporate and retail banking are among promising areas in Southeast Asia’s biggest economy, DBS Chief Executive Officer Piyush Gupta said yesterday.

Sixth-Largest Bank

The acquisition of Indonesia’s sixth-largest bank will cost DBS about 66.4 trillion rupiah if all Danamon shareholders accept the offer. DBS said the deal is expected to close in the second half of the year, subject to regulatory approvals.

“There are approvals to be got, and other regulatory issues, so I won’t be surprised if some investors switch out altogether or buy into other Singaporean banks,” Pathmakanthan said.

Following the takeover, Temasek’s stake in DBS will increase to 40.4 percent from 29.5 percent, the lender said.

Danamon’s 3,000-branch network serves 6 million customers. The Indonesian economy grew 6.46 percent last year, the most since before the Asian crisis in 1997. It is forecast to grow 6.5 percent in 2012.

To contact the reporter on this story: Sanat Vallikappen in Singapore atvallikappen@bloomberg.net

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

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