TOKYO/SINGAPORE (Reuters) - Mitsubishi UFJ Financial Group (MUFG) 8306.T is in talks to buy a 40 percent stake in Bank Danamon Indonesia BDMN.JK for around 200 billion yen ($1.75 billion), a person with direct knowledge of the talks told Reuters on Thursday.
MUFG, through its core unit Bank of Tokyo-Mitsubishi UFJ, intends to buy Danamon shares from Singapore state investor Temasek Holdings [TEM.UL], a major shareholder, said two sources, who declined to be named as the talks were not public.
Faced with sluggish growth at home, MUFG has expanded its presence in Southeast Asia in recent years, and already holds stakes in Vietnam's Vientinbank, Thailand's Bank of Ayudhya BAY.BK and Security Bank Corp SECB.PS of the Philippines.
MUFG plans to invest in Indonesia’s fifth-largest bank in the financial year starting April 2018, and is aiming to reach a basic agreement this year, the first source said.
“The company is strategically considering various investment opportunities in Indonesia,” an MUFG representative said, adding that domestic media reports on plans for a Danamon stake were not based on any announcement made by the company.
Temasek declined to comment, while an official at the Indonesian Financial Services Authority said there had not been “any submission from MUFG to own or enter Bank Danamon”.
Danamon, however, said its controlling shareholder had received an “expression of interest” related to its shareholding in the company, but no deal had been confirmed.
“We understand that this interest depends on further negotiations ... It is not definite that the transaction will be implemented,” said Rita Mirasari, Danamon’s corporate secretary.
Shares of the Indonesian bank rose as much as 19 percent to a three-month high, after news of the possible stake sale that, according to estimates from Mandiri Sekuritas, values the stock at 6,200 rupiah apiece or 28 percent above Wednesday’s close.
“We believe the market’s euphoria will not last long and expect the share price to be adjusted,” analysts at Mandiri wrote in a report.
INDONESIA BANKING SECTOR DEALS
Danamon lends primarily to the retail and corporate sectors and is a major private player in microfinance. Singapore's DBS Group Holdings DBSM.SI had sought to buy a controlling stake in Danamon in 2013, but dropped the bid after Indonesia changed laws to restrict single ownership in banks to 40 percent.
However, Indonesia can relax these curbs on special grounds, including if the investing bank is financially strong.
Temasek, one of the world’s biggest investors, currently owns about 68 percent in Danamon.
MUFG has future plans to seek a majority stake in Danamon if it gets regulatory approval, the first source said.
The Indonesian banking sector has attracted several deals over the past few years, as Asian lenders look to get a foothold in the world’s fourth-most populous nation.
South Korean Shinhan Bank acquired a majority stake in Bank Metro Ekspress in 2015, while China Construction Bank601939.SS entered the Indonesian market by acquiring Bank Windu in 2016.
MUFG’s last major acquisition in the region was a 20 percent stake in Security Bank in 2016, in line with its efforts to grow its global banking business amid low interest rate policies and strict capital regulation at home.
In the year ended March 2016, MUFG’s global banking business accounted for 31 percent of its net operating profit, up from 17 percent in the year ended March 2012.
($1 = 114.0000 yen)
Reporting by Taro Fuse in TOKYO and Anshuman Daga in SINGAPORE, additional reporting by Naomi Tajitsu in TOKYO, Kanupriya Kapoor and Cindy Silviana in JAKARTA; Editing by Himani Sarkar
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