©The
Straits Times, Singapore (Used by permission)
by Leslie Lopez, South–east Asia Correspondent
KL central bank's 11th–hour block could hurt other Malaysian
firms with interests in Indonesia
NO GO: State–controlled Maybank announced on Tuesday that approval for it to
acquire Bank Internasional Indonesia had been revoked.
THE move by Malaysia's central bank to block Maybank's
purchase of an Indonesian bank could trigger an awkward diplomatic situation
with Indonesia, say analysts and bankers.
They added that Bank Negara's shock decision on Tuesday night could also raise
challenges for other Malaysian firms operating in Indonesia's highly regulated
economy.
'This whole episode could have been handled better,' said a director of a
Malaysian financial institution with operations in Indonesia.
'This will only add to the many problems we already have to contend with in
Indonesia.'
State–controlled Maybank announced on Tuesday that Bank Negara had revoked an
approval it granted in March for the US$2.7 billion (S$3.7 billion) acquisition
of Bank Internasional Indonesia (BII).
Maybank had agreed to buy 56per cent of BII from Sorak Financial Holdings, a
firm controlled by Temasek Holdings. It would pay US$1.5 billion and then tender
for the remaining 44 per cent for about US$1.2 billion.
Maybank told the Malaysian stock exchange on Tuesday that Bank Negara was
concerned about a new Indonesian takeover law.
This would have required Maybank to sell down its BII stake to 80 per cent over
the next two years. Bank Negara feared this could lead to losses for Maybank.
What remains unclear is whether Bank Negara's decision will kill off the
proposed transaction.
It it does, Temasek and its partner in BII, South Korea's Kookmin Bank, stand to
pocket the US$150 million Maybank lodged as a deposit, say bankers close to the
situation.
Temasek yesterday said it had received notification from Maybank on the matter.
'This is an unfortunate development. We are in consultation with our
co–investment partner, Kookmin Bank,' said Ms Cheo Hock Kuan, director of
Fullerton Financial Holdings, a Temasek unit.
Bankers said Temasek would have few problems finding new suitors for BII, which
has a domestic network of 230 branches and about 700 automated teller machines.
But there is little upside for Malaysia. Bank Negara's decision has not gone
down well in Indonesia.
Mr Fuad Rahmani, the head of Indonesia's capital market watchdog Bapepam, told
The Straits Times by telephone: 'The regulation requires divestment in two
years, so if the bank performs well then its share price will obviously increase
and they can sell with gains.
'Unfortunately, their prediction is that they will incur a loss. That's
speculative.'
Many independent analysts agree, noting that Malaysia's regulators and companies
should take a longer view of investments in Indonesia.
'The chances that the price (for BII) could be higher and the rules could be
relaxed are quite high in this case,' said Mr Rizal Ramli, a prominent
Indonesian economist.
Many private economists and bankers have also questioned Bank Negara's 11th–hour
decision, which appeared to be motivated by the financial impact the deal could
have on Maybank.
'A regulator should be more concerned about the soundness of the deal from a
legal standpoint and maybe on issues of national importance. The near–term
financial impact of any deal is a risk that has to be borne by the private
sector,' said the chief executive of a Malaysian telecommunications group with
interests in Indonesia.
This executive and several other bankers fear the BII flip–flop could pose
headaches for other Malaysian firms with Indonesian interests.