Bank Niaga and Bank Lippo to merge

Bank Niaga and Bank Lippo to merge

http://biz.thestar.com.my/news/story.asp?file=/2008/6/3/business/21434693&sec=business

Bank Niaga president commissioner Datuk Shukri Hussin (left) exchanging documents with Bank Lippo president commissioner Md Ali Md Dewal (right). With them are Deputy Prime Minister Datuk Seri Najib Tun Razak (second from left) and Datuk Azman Mokhtar.

JAKARTA: Indonesian banks PT Bank Niaga Tbk and PT Bank Lippo Tbk are to be merged into one entity, to be known as PT Bank CIMB Niaga Tbk, at a cost of RM8.6bil.
Khazanah Nasional Bhd managing director Datuk Azman Mokhtar said the merger plan was a major step for Khazanah in complying with Bank Indonesia’s single presence policy (SPP) ahead of the 2010 deadline.
“This is a SPP-driven merger for growth,” Azman said after the signing ceremony for the merger here yesterday.
Bank Niaga president commissioner Datuk Shukri Hussin (left) exchanging documents with Bank Lippo president commissioner Md Ali Md Dewal (right). With them are Deputy Prime Minister Datuk Seri Najib Tun Razak (second from left) and Datuk Azman Mokhtar. Khazanah is the ultimate shareholder of both banks.
Under Bank Indonesia’s SPP policy, foreign parties cannot own a controlling stake in more than one Indonesian bank.
The merger was targeted to be legally completed by the fourth quarter while the full business integration and rebranding would take place by the end of next year, Azman said.
CIMB Group chief executive Datuk Nazir Razak said the integration cost of the merger amounted to RM388mil, to be used mainly for information technology systems and rebranding.
“This is relatively high if you compare it with our merger with Southern Bank Bhd, which cost some RM157mil. This reflects the difference in terms of scale (between both deals),” he said.
On completion of the merger, PT Bank CIMB Niaga will be Indonesia’s fifth largest bank by assets and also among the top five in terms of distribution network.
Post-merger, the new bank was expected to contribute 25% to CIMB Group’s sales, Nazir said, adding that the potential annual pre-tax profit arising from the synergy created was estimated at RM188mil.
CIMB Group entered the Indonesian banking sector in 2002 when it bought a 51% stake in Bank Niaga. Khazanah bought a 87.5% stake in Bank Lippo in 2005.
Under the merger plan, CIMB Group will buy a 51% stake in Bank Lippo from Santubong Ventures, a subsidiary of Khazanah, for RM2.1bil.
In consideration, Khazanah will receive 207.1 million new shares in Bumiputra-Commerce Holdings Bhd (BCHB), the listed owner of CIMB Group.
All Bank Lippo shares will then be exchanged for Bank Niaga shares at a ratio of 2.822 Bank Niaga shares per Bank Lippo share.
Once this was completed, Bank Lippo’s assets and liabilities would be transferred to Bank Niaga, Nazir said.
CIMB Group, he said, would offer a voluntary stand-by facility in which minority shareholders of Bank Niaga and Bank Lippo could immediately opt to receive a cash payment if they chose to sell their shares.
The fair value for Bank Niaga is 1,052 rupiah a share at 2.5 times price to book value and the fair value of Bank Lippo is 2,969 rupiah a share, or three times price to book value.
Should all shareholders retain a stake in the merged bank, CIMB Group and Khazanah would own about 58.7% and 18.7% respectively in the merged bank at the end of the exercise, Nazir said.
An EGM is scheduled be held on July 11 to obtain BCHB shareholders’ approval for the merger. Bank Niaga and Bank Lippo are expected to hold their EGMs on July 18.
The signing ceremony was witnessed by Deputy Prime Minister Datuk Seri Najib Tun Razak. (By YVONNE TAN)