Japan’s MUFG gets nod to buy majority stake in Indonesia’s Bank Danamon

The Danamon Bank logo is seen at its Tebet branch office in Jakarta, Indonesia. (Reuters pic)

JAKARTA: Indonesian regulators have cleared Japanese lender Mitsubishi UFJ Financial Group Inc’s (MUFG) plan to buy 73.8% of PT Bank Danamon Tbk , in what could become the biggest foreign acquisition of an Indonesian firm on record.

The Indonesian Financial Services Authority (OJK) told Reuters on Friday it would grant MUFG special permission to take its holding beyond 40%, where foreign ownership of commercial banks has been capped since 2012.

OJK deputy commissioner for banking, Heru Kristyana, also confirmed MUFG planned to merge Danamon with local peer PT Bank Nusantara Parahyangan Tbk.

MUFG, Bank Danamon and Bank Nusantara Parahyangan did not respond to requests for comment.

Japan’s biggest bank by assets in December said it would seek a majority stake in Bank Danamon, to build its presence in Southeast Asia’s biggest economy.

MUFG initially bought 19.9% of Bank Danamon from Singapore state investor Temasek Holdings (Private) Ltd for 15.875 trillion rupiah (US$1.17 billion), valuing the Indonesian lender at around US$6 billion.

On Tuesday, MUFG received regulatory approval to raise its holding to 40% through the purchase of a 20.1% stake from Danamon shareholder Asia Financial Holdings Ltd.

The final transaction will mark the biggest exemption from caps on foreign ownership of Indonesian banks, as the regulator promotes consolidation among the country’s 100-plus lenders.

A successful MUFG-Danamon deal would also mark the biggest stake purchase of an Indonesian company by a foreign entity since Philip Morris International Inc bought 60% of HM Sampoerna in 2005 for US$3 billion, Thomson Reuters showed.

The Danamon purchase is the latest in a string of deals by MUFG. The bank’s other Southeast Asian holdings include stakes in Vietnam’s Vietinbank, Thailand’s Bank of Ayudhya PCL and the Philippines’ Security Bank Corp.

Also on Friday, OJK said Japan’s second-biggest lender, Sumitomo Mitsui Financial Group Inc (SMFG) would merge its Indonesian branch with local lender PT Bank Tabungan Pensiunan Nasional Tbk (BTPN).

SMFG and BTPN could not be reached for comment.