* SMBC in talks to buy 40 pct stake in BTPN
* TPG expecting 25 pct premium to current market price
* TPG executives in Tokyo for further talks with SMBC
* BTPN trades at 3.81 times price to book
By Denny Thomas and Taiga Uranaka
HONG KONG/TOKYO, April 29 Japan's Sumitomo
Mitsui Banking Corp is in advanced talks to buy a $1.2 billion
stake in BTPN, an Indonesian lender backed by TPG Capital,
people familiar with the matter told Reuters.
SMBC's pursuit of Indonesia's seventh-largest bank by market
value is another example of a Japanese company seeking to grow
in that country's fast growing financial services market. A sale
by TPG would also provide another case of a U.S. private equity
investor raking in a massive profit from an early investment in
an Asian financial institution.
In 2008, TPG Capital Management LP acquired a 71.6
percent stake in the Indonesian pensioners' savings bank, named
Bank Tabungan Pensiunan Nasional Tbk PT (BTPN), for
$195 million. The private equity firm's stake dropped to 58.5
percent after a rights offering in 2010.
SMBC, a unit of Japan's third-largest lender by assets
Sumitomo Mitsui Financial Group Inc, is currently
negotiating to buy 40 percent of TPG's stake, allowing it to
abide by Indonesia's new foreign ownership limits for banks, the
people added. The stake is currently valued at $1.2 billion,
based on Friday's stock price.
SMFG and TPG declined comment.
The sources declined to be identified as the discussions
TPG executives were in Tokyo this week for another round of
talks, one person with knowledge of the matter said. It was not
immediately clear what TPG plans to do with its remaining 18.5
percent stake, although the buyout firm may sell the shares in
the open market, people familiar with the matter said.
Established in 1958, BTPN now operates as a full-fledged
commercial bank with a market value of $3 billion and has more
than 19,000 employees and over 10,000 branches.
BTPN is the world's seventh-most expensive bank among
lenders with a market value of $1 billion or above, according to
Thomson Reuters data. It trades at a price-to-book (P/B)
multiple of 3.81, up from 0.7 in December 2008, when TPG struck
TPG is expecting a 25 percent premium over the current
market price for the stake, which would take the deal value to
$1.5 billion, giving it a P/B multiple of around five, one
person familiar with the talks said.
A successful deal would give SMBC a foothold in the rapidly
growing Indonesian economy and an under-developed banking
market, where just 20 percent of working age individuals have a
bank account, compared with nearly 100 percent in Australia and
New Zealand. Indonesia, which is Southeast Asia's biggest
economy, is forecast to grow at 6.2 percent in 2013, fuelling
demand for consumer and corporate loans.
Last year, Indonesia issued new bank ownership rules that
limit single ownership in local banks at 40 percent. The new
rules have made it difficult for buyers such as SMBC to get
control of a domestic bank.
The same rule has delayed the approval of Singapore's DBS
Group Holdings Ltd $7.2 billion bid for PT Bank
Danamon a year after it was launched. The Indonesian
bank regulator is expected to make a final decision on the
DBS-Danamon deal in May.
TPG and its Indonesian affiliate North Star agreed to a five
year lock up when they acquired the stake in 2008. That lock up
expired in March this year. Since then, several suitors have
held informal talks to buy TPG's stake. SMBC's bigger rival,
Mitsubishi UFJ Financial Group Inc had also expressed
interest buying the stake, but those talks have since
discontinued, the people familiar with the matter said.
It was unclear whether TPG and SMBC would announce a deal
before Indonesian bank regulator would make a final decision
DBS-Danamon deal next month.
Sumitomo Mitsui Financial Group is working with Goldman
Sachs Group Inc, people familiar with the matter said.
Goldman Sachs declined to comment.
A successful sale to SMBC would be the latest lucrative exit
from bank and insurance assets for private equity in Asia. Many
of those investments were made around the mid-2000s as U.S.
private equity firms in particular snapped up stakes in regional
banks and insurers at low valuations following the Asian
financial crisis that crippled many financial institutions
across the region.
Earlier this year, private equity firm Carlyle Group LP
sold its remaining stake in China's No.3 insurer China
Pacific Insurance Co Ltd , raking in a total profit
of more than $4 billion, its largest-ever dollar profit on an
TPG's previous bank exits in Asia include the sale of an 18
percent stake in China's Shenzhen Development Bank, which the
firm acquired in 2004. That generated a return of about 16 times
the initial investment of $155 million, selling the stake in two
blocks to Ping An Insurance for a total of around $2.4 billion