Hopes are high for publicly listed Bank Permata after it was revealed that a majority stake in the lender is to be acquired by Thailand's Bangkok Bank, effectively putting an end to wild rumors about the acquisition since early this year.

Bangkok Bank announced on Thursday that it had agreed to buy 89.1 percent of the private bank’s shares for around US$2.67 billion as part of its overseas expansion.

The majority of Bank Permata shares are currently owned by British financial giant Standard Chartered and Indonesian diversified conglomerate PT Astra International, with each owning 44.56 percent of the bank, which operates about 330 branches in 62 cities across Indonesia.

Finance consulting company Koneksi Kapital Indonesia’s head of research, Alfred Nainggolan, said Bank Permata would be looking for a spot in the BUKU IV category, which includes banks whose core capital exceeds Rp 30 trillion ($2.14 billion).

“This is because they will have more capital funds through this acquisition as Bangkok Bank also operates in the banking industry while Astra does not,” Alfred told The Jakarta Post over the phone on Friday.

Alfred, however, said competition in Indonesia’s banking industry was fierce, warning investors that the acquisition at 1.77 times book value was a premium price and thus would not automatically boost the bank’s share price as it would eventually depend on its financial performance.

The deal values Permata at 1.77 times its book value as of September and indicates a purchase price of Rp 1,498 per share. On Friday, the price of the stocks, which are traded at the Indonesia Stock Exchange under the code BNLI, stood at Rp 1,275 apiece, lower 2.67 percent compared to the previous closing.

The deal is expected to close in 2020 with Bangkok Bank set to make a mandatory offer for the remaining 10.88 percent of the shares at the same purchase price after completing the transaction to acquire the stake from Standard Chartered and Astra.

“There is a possibility that the share price during the tender offer is the highest as recent history has shown that the price will lower after the tender offer,” said Alfred, adding that private lender Bank Danamon served as an example as the bank’s share price fell after being taken over by Japanese Mitsubishi UFJ Financial Group (MUFG).

“There is a big question about why Astra let banking service out of its portfolio,” he said.

Both Astra and Standard Chartered are obliged to sell all of their shares should one of the two companies decide to sell the ownership as part of an agreement upon acquiring Bank Permata in the first place, people familiar with the matter told the Post. 

Astra’s representatives did not confirm nor deny the agreement upon being contacted by the Post, saying “the matter is confidential”.

Astra International investor relations head Tira Ardianti said her company regularly reviewed its investment portfolio, adding that Astra’s decision to sell Bank Permata had taken several things into consideration including the bank’s improved performance and the positive prospects of Indonesia’s financial services industry.

“Our strategy is to strengthen our existing position as a retail financial services provider in Indonesia as we have various businesses within financial services such as auto consumer finance, heavy equipment financing, insurance and financial technology lending platforms,” Tira told the Post on Friday.

“The transaction will deliver a positive outcome for Astra,” she stressed.

Rumors about takeover interest in Bank Permata had been gaining attention this year after Standard Chartered said in February that investment in the bank was no longer core, signaling it was open to selling its stake. Bank Permata, the 12th-largest bank in Indonesia by assets, had $7.6 billion in outstanding loans and $8.5 billion in deposits as of September.

According to United States consulting firm McKinsey & Company, banking sector consolidation in Asia is expected to pick up as economic growth across the region slows and lenders grapple with thinning margins, worsening asset quality and rising costs.

PT Mirae Asset Sekuritas Indonesia research and development manager Lee Young-jun expressed a similar view, saying many foreign banks were coming to Indonesia due to its big population, high net interest margin and promising economic potential.

“Banks from Korea, Japan and other countries have made the decision to invest or acquire Indonesian banks in order to do strategic business for example in manufacturing companies,” said Lee.

He expected there would be some strategic business opportunities going forward in Bank Permata’s business.

“For instance, the largest loan contribution is coming from manufacturing, commercial and services in Bangkok Bank, which means they have professional [expertise] in those sectors as well as good relationships with firms but they do not yet have a presence in Indonesia,” said Lee. “Thus, I think there could be interesting opportunities and synergies between Bank Permata and Bangkok Bank.”

Bank Permata president director Ridha DM Wirakusumah said in a statement on Thursday that the bank welcomed the purchase of its shares by Bangkok Bank.

“Bangkok Bank is one of the largest banks in Thailand with a broad network. Its ability [to navigate] across sectors in Asia will bring us significant added value for clients and customers,” he said.

“International expansion is our key strategy. Indonesia in particular is a key focus for us, as it is one of the fastest-growing major economies in Asia with highly attractive macroeconomic fundamentals, favorable demographics and increasing ASEAN regional integration,” said Bangkok Bank chairman Piti Sithi Amnuai in a statement on Thursday.

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