Government exits Bank Permata at premium to market

Entire $193 million stake bought by Standard Chartered consortium, boosting its holdings to 89%.
The Indonesian government has sold its remaining 25.9% stake in the countryÆs ninth largest lender, Bank Permata, through a block trade that saw the shares change hands at a 10.75% premium to the most recent close.

The price seemed steep at first. However, it turned out that it was bought by the consortium with a controlling stake in Permata - which consists of Standard Chartered Bank and IndonesiaÆs leading car manufacturer Astra International. The consortium bought the entire Rp1.75 trillion ($193 million) block of shares and was keen to make sure nobody else would come in and disrupt their plans for the bank.

This would have been particularly important, analysts note, as certain corporate decisions in Indonesia require a 75% shareholder approval.

The price is also likely to have been driven up because of Bank PermataÆs limited freefloat, which makes it hard to buy shares in bulk in the market. Before this deal, Standard Chartered and Astra held 63.1% of the bank and will now see their combined stake increase to 89%. The holding is split equally between the two partners.

ôThey were very much the natural buyers of such a big stake,ö says Bill Stacey, regional banking analyst at Credit Suisse, who argued that the price wasnÆt excessive compared with other bank transaction in Indonesia.

ôFor Standard Chartered (the acquisition) is very small in dollar terms and in terms of contribution to the bottom line, but to have a 44.5% stake in a top 10 bank in Indonesia is a valuable asset. And there is the potential that eventually they can buy out their partner given that a bank is more likely to be a natural owner long-term than an industrial company,ö Stacey adds.

In a brief statement to confirm the purchase, Standard Chartered said it remains committed to developing and growing its business in this ôhighly attractive market.ö

The government, through its agent Perusahaan Pengelola Aset (PPA), sold all its 2 billion shares in Bank Permata at a price of Rp875 per share, which marked a premium compared with MondayÆs closing price of Rp790. The shares were suspended Tuesday pending the completion of the deal, which was jointly led by Bahana Securities and Deutsche Bank.

The transaction price values the bank, which has total assets of about $3.9 billion, at 2.6 times its 2005 book value of Rp331.9 per share and 2.5 times the 2006 book value as estimated by BNP Paribas Peregrine in a recent research report. This compares with the most recent government sell-down of Bank Permata in December 2004, which was done at 2.7 times prospective 2004 book value û at the time the highest ever price achieved for a government-mandated bank sale in Indonesia.

The sale was done through a bookbuilding process that was completed late Tuesday (September 5) and the final price was then compared to the governmentÆs floor price. The latter wasnÆt disclosed to anyone, including the boookrunners, but was likely below the priced offered by Standard Chartered and Astra since the deal went ahead.

Sources familiar with the offering said even outside the Standard Chartered/Astra bid there was strong demand for the shares and orders were received from several good quality names. Hedge funds, which have shown muted interest in equity deals over the summer, were also said to have been present in the book. This should be encouraging for other Asian equity deals in the pipeline as hedge funds are often key to driving the order book on block trades because of their ability to make quick decisions.

The selldown was part of an ongoing process that is seeing the Indonesian government divest the shareholdings in the countryÆs banks that it accumulated in a bailout exercise after the Asian financial crisis. The money raised from these sales is being used to cover the budget deficit, which is forecast to reach Rp42.2 trillion, or 1.4% of GDP, this year.

The government first sold a 51% stake in Bank Permata in October 2004, which was bought by Standard Chartered and Astra. The two partners increased their stake to 63.1% two months later by taking up just over half of a second government sell-down, which this time accounted for 20% of the share capital.

The government has also completed its divestment of Bank Central Asia (BCA) and Bank Danamon and yesterday Renny Rorong, corporate secretary of PTT, told Bloomberg that it wants to sell its remaining 5.5% in Bank Internasional Indonesia (BII) to investors ôsoonö.

The market is also expecting PTT to offload part of its holdings in Bank Mandiri (according to Bloomberg data it holds 68.9%) and Bank Rakyat Indonesia (BRI) (57.4%) in the reasonably near future. Any potential sale will depend on the market price and the budget situation, however.

PermataÆs share price gained 44% in December last year after a cabinet reshuffle halted the decline in the rupiah and sparked renewed optimism about the local economy. But is up a more modest 6.9% this year against a 26% gain in the Jakarta Composite Index. The stock fell 2.5% to Rp770 yesterday in the wake of the share sale, bucking the rise in the broader market.

In the first half of 2006, the bank reported a 9% increase in net interest income to Rp892 billion ($98 million).

¬ Haymarket Media Limited. All rights reserved.
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