Reuters: Global Markets: Bank Danamon shares surge 50 percent, DBS slips on takeover bid

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Bank Danamon shares surge 50 percent, DBS slips on takeover bid Apr 3rd 2012, 03:55 People walk in front of the Danamon Bank headquarters in Jakarta April 2, 2012. Credit: Reuters/Beawiharta By Neil Chatterjee and Harry Suhartono JAKARTA/SINGAPORE | Mon Apr 2, 2012 11:55pm EDT JAKARTA/SINGAPORE (Reuters) - Shares in Indonesia's Bank Danamon (BDMN.JK) surged 50 percent on Tuesday after a $7.2 billion takeover bid by Singapore's DBS Group (DBSM.SI), as investors jumped on an offer to transform the country's sixth largest lender into a bigger player. DBS, Southeast Asia's largest bank, on Monday said it offered 7,000 rupiah per share to minority Danamon shareholders, or a 52 percent premium to its previous closing price, for a deal that would be Indonesia's largest foreign takeover. Shares in Danamon, suspended late Friday and on Monday, rose to a high of 6,900 rupiah before easing to be up 40 percent at 6,450 by 0313 GMT. The stock saw the highest turnover .AM.JK on the Jakarta index .JKSE, which was up 1.1 percent. "Danamon are facing a great deal of pressure in terms of their micro finance business and DBS will be there to help them in terms of corporate banking," said Harry Su, head of research at Jakarta-based brokerage Bahana Securities, which recommends investors take up the DBS offer. Shares in DBS, part-owned by Singapore sovereign investor Temasek Holdings TEM.UL, fell nearly 4 percent in Singapore to hit a seven-week low of S$13.63, as the price offered for Danamon surprised some investors. The shares later rose to S$13.74. CIMB said the merger would bring long-term synergies, but in the short term DBS may see a lower return on equity. "The share-and-cash structure works as it keeps EPS (earnings per share) dilution and capital strain palatable," CIMB said in a report. It maintained its outperform rating and target price for DBS of S$15.10. The transaction, involving S$6.2 billion ($4.93 billion) in shares for Temasek and the rest in cash for minority investors, would rank as Asia's fourth-biggest banking deal. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC on deal r.reuters.com/tep47s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> SIGNIFICANT CHANGES AHEAD? Analysts said the deal would likely lead to significant changes in Danamon's focus and might take some time to pay off for both banks. DBS's CEO Piyush Gupta said on Monday he expected to realize synergies from the deal from 2015. "We expect that this merger will result in massive changes in terms of corporate culture and business plan, requiring substantial consolidation for Bank Danamon before it can become a better bank post its merger with DBS," Bahana told clients in a note. Analysts said the deal would also be positive for DBS longer-term as Danamon would significantly expand its footprint in Indonesia, Southeast Asia's largest economy, which recently regained investment grade status from two rating agencies. "The acquisition will diversify DBS' earnings base, and DBS expects to add significant value to Danamon in respect of funding franchise, corporate lending and consumer proposition - hence we are positive," brokerage OSK DMG said in a report. The deal would make DBS the fifth-biggest lender in Indonesia, where bank penetration is low and annual loan growth runs at 20 percent. Andrew Chow, head of research at UOB Kay Hian in Singapore, said a counterbid for Danamon "is unlikely because it seems to be quite a fair deal. Indonesia is very attractive and in the bigger scheme of things, the valuation that they (DBS) pay is not bad." (Additional reporting by Charmian Kok and Eveline Danubrata in SINGAPORE; Editing by Richard Borsuk) Link this Share this Digg this Email Reprints

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