July 31, 2018 / 8:24 AM / a year ago

Indonesia approves MUFG's stake increase in Bank Danamon to 40 percent

JAKARTA (Reuters) - Indonesian regulators have cleared Japanese lender Mitsubishi UFJ Financial Group’s (MUFG) (8306.T) plan to increase its stake in Bank Danamon (BDMN.JK) to 40 percent, bringing MUFG closer to completing what could be the biggest takeover of an Indonesian firm.

The Indonesian Financial Services Authority (OJK) approved MUFG’s planned purchase of a 20.1 percent stake from shareholder Asia Financial, MUFG said in a statement on Tuesday. The Japanese lender said it would complete the purchase of those shares “as soon as possible”.

MUFG had said in December it was seeking a 73.8 percent stake in Bank Danamon, to build a foothold in Southeast Asia’s biggest economy.

Japan’s largest lender had laid out a plan to buy Danamon shares in three stages.

In the first stage, completed in December, MUFG bought 19.9 percent from Singapore state investor Temasek Holdings [TEM.UL] for 15.875 trillion rupiah ($1.17 billion). At that price, Danamon was valued at around $6 billion.

The Japanese bank would then raise its stake to 40 percent and seek approval to hold at least 73.8 percent in Indonesia’s fifth-largest bank by offering to buy out other shareholders.

However, MUFG needs special permission from OJK to take its holding above 40 percent - where foreign ownership of commercial banks is normally capped though exceptions are sometimes made.

MUFG did not immediately reply to requests for comment on Tuesday on whether the Japanese lender had been granted approval for a 73.8 percent stake. OJK declined to comment.

If approved, this would mark a rare major purchase by an overseas lender in Indonesia’s banking sector after caps on foreign ownership of banks were introduced in 2012.

An MUFG official told Reuters in January that Bank Danamon would be merged with another Indonesian bank called Nusantara Parahyangan (BNP) after MUFG’s 40 percent stake was approved.

Danamon is the latest in a string of deals by the acquisitive MUFG, which already holds stakes in Vietnam’s Vietinbank, Thailand’s Bank of Ayudhya (BAY.BK) and Security Bank Corp (SECB.PS) of the Philippines.

Danamon’s shares rose 5 percent on Tuesday to 6,575 rupiah ($0.46), giving it a market value of around $4.5 billion.

Reporting by Cindy Silviana; Writing by Fanny Potkin; Editing by Muralikumar Anantharaman

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