Published August 15, 2008

Bapepam indicates stricter position on Maybank-BII deal

By PAULINE NG
IN KUALA LUMPUR
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THE impasse in Malayan Banking's proposed purchase of Bank Internasional Indonesia (BII) may take longer to resolve, judging from the recent sounds emanating from Indonesia which indicate a hardening in its stance.

Earlier this week, Indonesia's capital market regulator Bapepam confirmed it was in contact with the Malaysian central bank over the issue - which Bapepam chief Ahmad Fuad Rahmany acknowledged had become 'complex'. But he said the ball was in Bank Negara's court, and stated that Bapepam had little intention of making an exception for Maybank in applying its new rule.

In reports carried by Indonesian news portal detikfinance on Wednesday, Mr Fuad said Bapepam had made certain suggestions to Bank Negara after receiving a letter from it explaining the revocation of its earlier approval for Maybank to proceed with the BII buy, but declined to disclose the suggestions.

He stressed the new rule on takeovers would be implemented without exception, however, and any extension of the divestment period would be given only under certain circumstances as provided for under the regulation.



Because of Bapepam's introduction of a new takeover rule requiring the acquirer to sell 20 per cent of the acquired company within two years of the takeover, Bank Negara had withdrawn its approval citing possible losses by Malaysia's biggest financial group if it were forced to sell in that time frame. That plus impairment charges would have led to potential losses estimated at RM3.5 billion (S$1.5 billion).

Having already ruled out a rule waiver, Bapepam last week indicated a time extension might be possible, giving hope it was prepared to be flexible. But Mr Fuad's comments now suggest any extension would have to fall under already specified conditions, which according to reports are essentially emergency-type circumstances or if the Indonesian bourse suffers a major technical glitch.

Maybank management has met Bapepam on the matter but the bank and Bank Negara have declined to comment on the problem which could potentially further complicate the oftentimes prickly relations between the two countries.

Asked earlier this week if Bank Negara would agree to the deal if Maybank was given an extension, governor Zeti Akhtar Aziz replied: 'We don't discuss something that is in progress. When the transaction is completed successfully, we may comment.'

Although Ms Zeti was put on the spot, her choice of the word 'when' rather than 'if' appeared to suggest optimism that a solution was in sight.

Mr Fuad had said he wanted the issue resolved quickly but had maintained that the solution lies with Bank Negara. Tellingly, he had also observed that the Malaysians should have better protected themselves from possible market risks and reiterated Indonesia did not need to accede to Malaysian requests as 'it is they that need to follow our capital market rules because they are the ones that want to play here'.

If the deal is not completed by end-September, Maybank has said it could lose a RM480 million deposit to Fullerton Financial Holdings, a Temasek unit. In March, the bank had proposed to take over BII in a RM8.6 billion deal after it won a tender for Sorak Financial Holdings, which holds 55.5 per cent in BII. This would have been followed by a general offer for the rest of BII shares. Sorak is 75 per cent held by Fullerton, and the balance by Kookmin Bank of Korea.