Permata sets new highs

Yesterday''s placement of Bank Permata stock sets new highs for Indonesian bank sales.

Sole coordinator, ABN AMRO priced a 20% placement of Bank Permata stock yesterday (December 8) at Rp750 a share. That price was a 6.68% premium to the price at which the consortium of Standard Chartered and Astra International bought 51% of the bank last month.

The price equates to a valuation of 2.7 times prospective 2004 book value of Bank Permata, the highest price ever achieved for a government-mandated bank sale in Indonesia. The recent placement of Bank Danamon stock was priced at a 2.1 multiple of book value and Bank Niaga was priced at a 1.6 times book valuation.

Bank Permata's shares were suspended yesterday trading at over Rp1000. However the free float in the stock was virtually zero before this placement and so investors used the reference price of the strategic sale price from which to place their orders.

Avoiding some of the confusion that surrounded the previous placement for Bank Danamon, the lead manager went out without an indicative range. Having built the book the leads then went to the PPA, which is the selling agent of the Indonesian Ministry of Finance. It was then the decision of the PPA to price the placement at Rp750, at which level the book was said to be two times covered.

The PPA did not reveal was the Ministry of Finance's floor price was for the deal, but presumably as they priced it, it was at or below the Rp750 level. The allocation saw the Standard Chartered and Astra consortium take just over half the deal, bringing their total stake in Bank Permata up to around 61%.

The remaining 10% of the stock - or 50% of the deal - was placed with predominantly Indonesian institutions, including a small portion of retail investors. The deal had not been underwritten and the shares will have to be crossed today in open trading on the Jakarta Stock Exchange.

Having sold 71% of the stock, the government now retains around 28% of Bank Permata, a position it will keep. If it wants to sell any more of the bank, it will have to seek authorization from the Indonesian parliament.

Standard Chartered and Astra can now concentrate on making Permata work for them. The fact they were willing to pay such a relatively high price for the bank, is due to the strategic ability they will have to derive value from the investment due to the combination of Astra's automotive finance needs and Standard Chartered's retail bank expertise.

It is understood that two more sales of government held bank stock of BCA and BII might be coming to market before year-end. Although there is no official confirmation of these sales, the government of Indonesia is under pressure to reduce its budget deficit by the end of the year under the terms of an agreement signed with the IMF at the beginning of 2004.

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