Mitsubishi UFJ Financial Group, Inc.’s commercial banking entity The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“MUFG”) announced that it has entered into conditional share purchase agreements with Asia Financial (Indonesia) Pte. Ltd. (“AFI”) and other affiliated entities (the “Sellers”), to acquire their shareholding interests in Indonesian bank PT Bank Danamon Indonesia, Tbk. (“Danamon”), subject to applicable regulatory approvals. AFI is a wholly-owned subsidiary of Fullerton Financial Holdings Pte. Ltd. The Sellers currently hold in aggregate, 73.8% shareholding interests in Danamon.
This strategic investment by MUFG will be executed through three steps (the “Proposed Transaction”), and completion of the Proposed Transaction will result in MUFG becoming the largest shareholder in Danamon. It will also bolster MUFG’s growth strategy in Asia & Oceania and contribute to the overall development of the Indonesian banking sector.
Outline of Proposed Transaction:
Step 1: MUFG will acquire an initial 19.9% stake in Danamon, based on a price of IDR 8323 per share (US$0.61) and at an investment amount of IDR 15.875 trillion (US$ 1.171 billion). The price was based on a 3Q17 P/B of 2.0x with certain adjustments applied. AFI will continue to be the majority shareholder in Danamon upon closing of Step 1, which is expected to be within a few days. The Bank of Tokyo-Mitsubishi UFJ, Ltd. A member of MUFG, a global financial group
Step 2,: MUFG intends to then seek regulatory and other relevant approvals to acquire an additional 20.1% to increase its stake in Danamon to 40% (“Step 2”). This step is expected to close between Q2 – Q3 of 2018, subject to receiving these approvals.
Step 3, : Upon completion of Step 2, MUFG intends to seek the necessary approvals to increase their stake in Danamon beyond the 40%, and this will provide an opportunity for all other existing Danamon shareholders to either remain as shareholders or receive cash from MUFG. With the closing of Step 3, MUFG’s final stake in Danamon is expected to be over 73.8%.
MUFG’s investment in Danamon represents another crucial milestone for its, strategic plans in Asia & Oceania. The bank has greatly expanded its presence, diversified its business mix in the region and strengthened its commercial banking business through similar strategic partnerships with prominent banks across the region. In Indonesia, MUFG has been operating for 50 years and currently has a full services branch in Jakarta, one sub-branch in Surabaya, and nine service points across the country. Indonesia is the largest economy in ASEAN underpinned by excellent growth fundamentals including favourable demographics, a rich resource base and stable political climate. MUFG’s investment in Danamon is a strong testament to the bank’s optimism in the country’s long-term prospects and commitment to the ongoing development of the Indonesian banking sector. MUFG expects that this investment into the country will positively contribute to the growth of the Indonesian banking sector and economy as a whole. MUFG will establish an integrated and comprehensive services platform that serves as a gateway for clients wishing to make inroads into Indonesia’s burgeoning economy as well as local companies keen on expanding into the region. This investment will also strategically allow MUFG to benefit from Danamon’s foothold in the developing local retail and small and medium enterprises (SME) segments to deepen its banking franchise in Indonesia.
Mr. Takayoshi Futae, MUFG’s CEO for Asia & Oceania region said: “As one of the leading banks in Asia & Oceania, we have long recognised Indonesia’s role as one of the key drivers of the region’s development and have sought to establish a stronger presence in the country.” Mr. Futae added: “Danamon is a well-respected institution in the local banking sector, renowned for its experienced and capable management team, sound business platform and profitable franchise, and would make a very welcome and strategic addition to the MUFG group as we press on with our regional strategy. We are supportive of the leadership of Danamon’s management, and are confident that our future collaboration will create synergies that would allow us to better serve customers and shareholders and enhance our mutual growth.” “As Japan and Indonesia celebrate 60 years of diplomatic relations in 2018, this partnership is also a fitting and timely reminder of the deep ties that exist between both countries, and we will leverage this alliance to further intermediate business flows between these two great nations and contribute to ASEAN’s economy.”
For Danamon, currently the fifth most profitable Indonesian commercial bank by earnings, the investment by MUFG will allow it to tap on MUFG’s financial strength, relationships with Japan’s top corporates, global network as well as product and sectorial expertise to enhance its growth ambitions. As a supportive and long-term shareholder, MUFG will harness Danamon’s established and respected brand franchise to foster greater synergies and enhance Danamon’s position as a leading and prominent Indonesian bank, one that remains committed to delivering high quality services to its customers. “We are confident that MUFG coming in as a shareholder of Danamon is beneficial to the company’s stakeholders, including its employees, clients and customers, as well as business partners. With deep banking expertise and international experience, we believe MUFG is the right partner for Danamon as they embark on their next phase of growth. Since 2003, we have been a shareholder in Danamon and will continue to be supportive of them. We remain invested in the company and look forward to working closely with MUFG during this period. Indonesia is a dynamic market and we continue to be optimistic about its growth and long term potential, as well as that of its financial services sector,” said Mr. Tow Heng Tan, Director, Fullerton Financial Holdings
Re-disseminated by The Asian Banker