ublished September 16, 2008

Little chance of Maybank's BII purchase

Indonesian watchdog reiterates no exemptions of new takeover rules

By PAULINE NG
IN KUALA LUMPUR
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THERE appears to be very little hope of Maybank proceeding with its proposed purchase of Bank Internasional Indonesia (BII) following a reiteration by Indonesian capital market watchdog Bapepam that no exemptions would be made in the implementation of its new takeover rules.

Bapepam stated that an exemption would undermine the fundamentals and objectives of the new rules and the credibility of its regulatory function.

Either acceding to Maybank's request for an exemption from the new rules or allowing it to undertake a partial tender offer of up to 80 per cent of BII shares 'would create a negative precedent to the newly introduced regulation', Bapepam said in its second rejection letter to Maybank.

In its reply on Sept 9, it further stated that an exemption would undermine the fundamental and objective of the new rules as well as the credibility of its regulatory function.

Maybank yesterday informed the stock exchange of Bapepam's rejection following its Sept 4 letter to the Indonesian regulator seeking a further reconsideration of its new takeover rules. Malaysia's biggest bank had earlier asked for a waiver of the new rules which were enacted at the end of June, nearly three months after Maybank had entered into an agreement to acquire BII.

Bapepam's refusal to entertain an exemption effectively spells the end of the RM8.6 billion (S$3.6 billion) deal, given that the Malaysian central bank has refused to sanction it under current circumstances.



Maybank said as much: 'The company respects this latest decision of Bapepam and under the terms of the share sale agreement dated March 26, in the event that any of the condition precedent is not fulfilled by Sept 26, the agreement shall lapse.'

The Malaysian bank would lose a RM480 million non-refundable deposit paid to Fullerton Financial Holdings after it won a tender for Sorak Financial Holdings and entered into a share sale agreement. Fullerton owns 75 per cent of Sorak - the controlling shareholder of BII - and Kookmin Bank the balance. Because it had earlier set aside the requisite amount in a Singapore-dollar fund, the net impact of the deposit would be reduced to RM290 million owing to foreign exchange gains.

Bapepam's introduction of the new rules which requires the acquirer to sell 20 per cent of the acquired company within two years of the takeover had been objected to by Bank Negara as calculations revealed that it was possible for Maybank to incur impairment losses of up to RM3.4 billion under those circumstances. The central bank had revoked its earlier approval for the deal, setting off a chain of appeals by Maybank for Bapepam to consider either a waiver or extension of time to sell down the BII shares.

Analysts had been negative on the deal, believing Maybank to be overpaying. Through it all, Bapepam had indicated that it was not prepared to budge. Maybank closed 15 sen higher at RM7.85 yesterday.