Published September 17, 2008

Maybank gets the go-ahead for BII purchase

KL lifts objection to deal after Jakarta eases takeover rule

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(KUALA LUMPUR) Malaysia's central bank reinstated approval for Malayan Banking's planned US$2.7 billion purchase of an Indonesian bank after a takeover rule governing the purchase was eased.

Malaysia's central bank yesterday lifted its objection to the purchase of PT Bank Internasional Indonesia (BII), Maybank said in a statement to the Malaysian stock exchange. Malaysia had blocked the purchase after Indonesia enacted a rule that forced buyers to sell 20 per cent of the target back to the market in two years, saying the law may trigger losses at Maybank.

Indonesia's regulator will extend the two-year time frame if Maybank's losses from the purchase exceed 10 per cent of the acquisition price of 510 rupiah a share, Ahmad Fuad Rahmany, chairman of the Capital Market and Financial Supervisory Institutions Agency, said in a Sept 15 letter to Maybank.

'We believe the above clarification of conditional extension will lead to a positive development with respect to Maybank's proposed acquisition,' Mr Rahmany wrote in his letter.

Maybank last month set aside RM483.8 million (S$201 million) for a deposit on the purchase, in case the acquisition failed. The bank said on Monday the Indonesian regulator had refused to drop the takeover rule completely.



'For as long as Maybank is unable to dispose of the 20 per cent stake at a price higher than 459 rupiah a share, it will be given an extension,' Chris Oh, an analyst with JPMorgan Securities (Malaysia) Sdn, said in a note to clients yesterday. 'Maybank should be able to absorb the loss.'

Malaysia's central bank opposed the deal over concern Maybank would lose RM3.4 billion by meeting the takeover rule, Maybank chief executive officer Abdul Wahid Omar said on Aug 27.

Losses would be incurred if Maybank sold BII shares for less than the purchase price, and if Maybank wrote down the value of the asset, Mr Abdul Wahid said last month.

Maybank yesterday lost 5.7 per cent to RM7.4 in Kuala Lumpur trading before Mr Rahmany confirmed the contents of his letter.

The planned acquisition was viewed by many investors as overpriced, and Maybank shares have lost 17 per cent since the takeover was announced on March 26. BII hasn't traded in Jakarta since July 29.

'The stock exchange will allow Bank Internasional's shares to resume trading once I receive the letter from the company,' Erry Firmansyah, president of the Indonesia Stock Exchange, said in a mobile-phone text message.

Maybank is buying the controlling stake in the Indonesian bank from a group led by Singapore investment agency Temasek Holdings. -- Bloomberg