What you need to know about DBS' reported purchase of Bank Danamon

Bank Indonesia approved 40% stake sale.

According to CIMB, newswires came through saying that Bank Indonesia (BI) has approved a 40%-stake sale of PT Bank Danamon to DBS.

It also says that BI will continue to negotiate with MAS and may allow DBS to buy all of Temasek’s stake in Danamon if certain conditions are met.

The BI conditions revolve around reciprocity,i.e. approval for three Indonesian state banks to operate in Singapore.

Here's more from CIMB:

We think that this news is a mild disappointment for DBS. We do not think that DBS will find a 40%-stakeuseful and might walk away. OurOutperform rating on DBS is unchanged with earnings delivery beingthe catalyst.Our GGM-based target price also remains unchanged.

News is sketchy but we gatherthat BI has approved the sale of only 40% ofBank Danamon.DBS might be allowed to buy all of Temasek’s stake if certain conditions are met.

This was originally a share plus cash deal from DBS, made a year ago, which would see DBS swapping 437m of its shares (valued at S$14.07/share) withTemasek for a 67%-stakein Bank Danamon.

This allowsTemasek to consolidate its interest into one single bank .DBS was also slated to launch a tender offer to all minorities at IDR7,000/share. The deal was to give DBS a growth platform in Indonesia.

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