Singapore lions get banned from the hunt
By Paul Mackintosh - 12/08/13
Following the recent failure of the US$7.2 billion takeover of Indonesia’s Bank Danamon by Singapore’s DBS, further reports have now emerged that might give a crumb of comfort to private equity investors in the region – not least Temasek Holdings, which saw its hopes of exiting its own Danamon stake to its daughter entity DBS dashed by Indonesian regulator Bank Indonesia. Speculation in the Malaysian press and elsewhere is hinting at possible Chinese or Japanese buyers for Temasek’s Danamon stake.
Mitsubishi UFJ Financial Group was one entity instanced by Reuters reports, cited in the Malay Mail and elsewhere, which claimed that it was a suitor-in-waiting for Temasek’s 67% Bank Danamon stake until late in 2012. This is exactly the group now making a $5.6 billion bid for Thailand’s Bank of Ayudhya. Meanwhile, Japanese financial peer Sumitomo Mitsui Banking Corp. is apparently still in talks to buy a $1.2 billion minority stake in TPG Capital’s Indonesian banking investee BTPN.
Some pundits claim that Indonesia’s lustre as an investment destination has been diminished by Bank Indonesia’s decision to reassert the block on majority ownership among foreigners, but in my view, it isn’t so for private equity players at least. Minority stakes are just about the right digestible size for general partners (GPs), and there is clearly no dearth of appetite for them, if the Sumitomo/TPG/BTPN deal really is set to fly. And the Reuters reports cited are also talking of potential PRC interest from Industrial and Commercial Bank of China and China Construction Bank for Temasek’s Danamon stake, as well as from local SWF rival Khazanah, opening up the universe of potential buyers still further.
No, the real casualty is still likely to be Temasek itself. Other analyses bear out the interpretation that the whole Danamon transaction represented asset shuffling by Temasek, transferring its entire legacy exposure to Danamon to its own daughter entity DBS, which would make a better portfolio fit than continuing to hold Danamon directly. Unfortunately, Bank Indonesia declined to help it out, and laid bare once again the internal connections within Singapore Inc. If Temasek itself operates according to such criteria, is it any wonder when other jurisdictions judge it by them?
In the circumstances, a third party stake sale would not be a bad outcome for Temasek – if it truly is acting as the value-oriented investor it is supposed to be, rather than an arm of Singapore Inc., looking to corner a strategic section of a neighbouring banking market. TPG, CVC Capital Partners and the other truly independent private equity investors in Indonesia, meanwhile, have little to fear: as long as their acronyms don’t include SWF, they should have plenty of attractive bite-size targets to trade.