Bloomberg – DBS Bank Deal Seen Derailed as Indonesia Bars Control

By Sanat Vallikappen & Angus Whitley | 30 May 2013

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Investors are betting that Indonesia will drive DBS Group Holdings Ltd. (DBS) to abandon Southeast Asia’s largest bank takeover.

Indonesia’s central bank last week gave approval for Singapore-based DBS, which bid $6.8 billion for all of PT Bank Danamon Indonesia, to buy only 40 percent of the company as the regulator pushes for Indonesian banks to have equal access in Singapore. With the agreement expiring in three days, Danamon is trading at a larger discount to its takeover price than any pending deal in Asia larger than $500 million, according to data compiled by Bloomberg.

The outcome may depend on how successfully DBS can persuade Singapore’s authorities to reach an agreement with Indonesia, an economic rival, said Pitra Narendra, a Jakarta-based senior associate at Vriens & Partners, an advisory firm that specializes in assessing the political risk of investments in the region.

Presidential Elections

The Monetary Authority of Singapore referred to its May 21 statement when asked to comment. Difi Johansyah, a Jakarta-based spokesman for Bank Indonesia, didn’t respond to requests for comment.

Next year’s Indonesia presidential elections, the latest bank-ownership laws and a new central bank governor who started this month all attach more risk to any investment, Narendra said.

“A party might pick up this issue during the campaign and politicize it,” Narendra said in a phone interview. “If you look at the history between Indonesia and Singapore, there are outstanding contentious issues.”