MUFG to pay billions for Temasek's Bank Danamon stake

Singapore

JAPAN'S Mitsubishi UFJ Financial Group (MUFG) (see amendment note) on Tuesday said that it will buy a 73.8 per cent stake in Indonesia's fifth most profitable bank, PT Bank Danamon Indonesia, from a unit of Temasek Holdings.

On Tuesday, MUFG said that it has entered into conditional share purchase agreements with Asia Financial (Indonesia) Pte Ltd (AFI) and other affiliated entities. AFI is a wholly-owned subsidiary of Fullerton Financial Holdlings, which is in turn wholly-owned by Temasek Holdings.

MUFG added that with this acquisition, it will establish an integrated and comprehensive services platform that serves as a gateway for clients wishing to make inroads into Indonesia's burgeoning economy as well as local companies keen on expanding into the region.

This investment will also strategically allow MUFG to benefit from Bank Danamon's foothold in the developing local retail and small and medium enterprises segments to deepen its banking franchise in Indonesia.

The transaction will be executed in three parts, with MUFG acquiring an initial 19.9 per cent stake in its acquisition target, Bank Danamon, for 15.875 trillion rupiah (S$1.57 billion) or 8,323 rupiah per share. MUFG's CEO for Asia & Oceania, Takayoshi Futae said: "As one of the leading banks in Asia & Oceania, we have long recognised Indonesia's role as one of the key drivers of the region's development and have sought to establish a stronger presence in the country."

Mr Futae added: "Danamon is a well-respected institution in the local banking sector, renowned for its experienced and capable management team, sound business platform and profitable franchise, and would make a very welcome and strategic addition to the MUFG group as we press on with our regional strategy."

Temasek, which has been a significant shareholder in Bank Danamon since 2003, will relinquish its stake completely to MUFG when the transaction is concluded.

Temasek said in a Tuesday statement that MUFG is well-positioned with its strong Indonesian franchise for corporate lending and infrastructure financing to complement Bank Danamon's franchise and lead the bank into its next growth phase. "We believe that MUFG's interest in Danamon is testament to their confidence in the bank and that the combination will also be well-aligned with Indonesia's development and growth objectives."

MUFG's deal with Temasek came four years after DBS Group aborted its bid to buy a controlling stake in Bank Danamon.

DBS had dropped the bid after Indonesia changed laws to cap single ownership in banks to 40 per cent.

Amendment note: Mitsubishi UFJ Financial Group was previously abbreviated to MUFJ in the article. This has been amended to MUFG.