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Remember, one year ago, in August 2008, Malaysia Today wrote about Malaysia's largest bank, Maybank, paying RM3 billion more than what it should to take over an Indonesian bank that is in trouble and which the Singapore government was trying to get rid of. Unfortunately, not long after that, I was detained under the Internal Security Act and the matter died a natural death. NO HOLDS BARRED Raja Petra Kamarudin
WHAT WE WROTE THEN Back to the future: the fall of Saigon revisited (http://mt.m2day.org/2008/content/view/5339/84/) Of special interest is the New Straits Times report below about Maybank buying over Temasek’s interest in an Indonesian bank at RM3 billion more than what they should be paying. The interesting part, of course, is about who brokered this deal with Singapore and why Maybank was made to pay RM3 billion over-value. Daim took RM42 billion with him when he bailed out just before Tun Dr Mahathir left the scene. Expect the present figure to be close to that when Abdullah Ahmad Badawi leaves the scene. RM21 billion has already been moved just before the last general election. They only need another RM21 billion to match Daim’s RM42 billion. And the Maybank deal just reduced that RM21 billion to RM18 billion so there is not that far to go. If the new government is formed on 30 April 2008 there may be nothing left in the kitty. I, for one, would not want to be in that new government. TODAY'S REPORT KL raps Maybank board, orders changes
It paid too much for Indonesian banks | By Leslie Lopez, The Straits Times, 11 August 2009 | KUALA LUMPUR: Malaysia's central bank has directed a sweeping overhaul in the board of directors of the country's largest banking group Maybank, in an unprecedented government censure on a board of a financial institution. The little-publicised revamp followed government displeasure at the controversial acquisition of an Indonesian lender by Malayan Banking (Maybank) last year, officials say. Bank Internasional Indonesia (BII) was bought from a consortium led by Singapore's Temasek Holdings at a price that was deemed too high. Prime Minister Najib Razak, who directed Bank Negara to review the transaction, has endorsed the central bank's decision calling for a Maybank board revamp, the government officials say. 'The decision was also made that the board revamp will be carried out in stages and directors who are retiring won't be re-elected to the board,' said a senior government official who was involved in top-level discussions on Maybank's Indonesian venture. Maybank's main shareholders are national equity fund Permodalan Nasional and pension fund Employees Provident Fund. Bank Negara declined comment for this article, citing its policy of not discussing issues involving individual financial institutions. Maybank executives, including its chief executive officer Abdul Wahid Omar, also declined repeated requests for comment for this article. But the bank did announce the retirement of two directors and the appointment of three new members mid-last month. Between end-October last year, when the acquisition of BII was completed, and this March, three directors have resigned. 'This is part of the reforms that the PM is pushing for and it will raise the sense of greater accountability in the boards of government-linked companies,' said a senior adviser to PM Najib who is familiar with the central bank's decision on Maybank. In March last year, Maybank entered into an agreement to buy a 55 per cent interest in BII from Sorak Financial Holdings, which is majority-owned by Singapore's Temasek Holdings. The Malaysian bank agreed to pay US$1.5 billion (S$2.2 billion) for the stake and then make a tender offer for the remaining 44 per cent for roughly US$1.2 billion. But the global financial meltdown raised questions over the health of banks in general and reignited criticisms that Maybank was paying too high a price for BII. Maybank's position was further undermined when Indonesia introduced changes to its corporate takeover rules, which called on the Malaysian financial institution to sell down 20 per cent of its holdings in BII within two years of its takeover. Bankers close to Maybank had argued that the disposal was surely to lead to massive losses. Faced with the prospect that the deal could adversely hit Maybank and the Malaysian banking system, Bank Negara had revoked its approval for the BII acquisition. The approval was later reinstated. The deal was finalised after the Temasek-led consortium lowered the purchase price for the transaction by US$220.5 million for the 55 per cent interest in BII. In Bank Negara's review, which was completed in April this year, it concluded that Maybank's purchase price for BII was too expensive. The central bank also concluded that the Malaysian financial institution did not put in place adequate measures to protect itself in the event that the deal encountered problems, the government officials said. ******************************************* ONE YEAR AGO'S REPORT Temasek comes full circle with BII stake Early this year, however, Temasek indicated that it was selling its BII stake. Eventually, an agreement to sell the stake to Maybank for US$1.1 billion was announced in March. Business Times, 11 August 2008 Temasek Holdings’ trouble-plagued bid to sell a stake in Indonesia's PT Bank Internasional Indonesia to Malaysia's Maybank holds a significance beyond the deal itself. More than just a transaction gone awry, it also reflects the changing realities facing the Singapore investment company. The story of BII in Temasek's portfolio, in fact, says a lot about the shifts in its investment history over the last few years. It will not be too much of an exaggeration to say that the road to Barclays and Merrill Lynch started with two Indonesian banks in the early 2000s. BII was one of the first major overseas investments by Temasek. Back in 2003, Temasek led a consortium called Sorak Financial Holdings, which also included Kookmin Bank, Barclays and Swiss-based ICB Financial Group Holdings, to clinch ownership of BII after reaching an agreement with the Indonesian Bank Restructuring Agency (Ibra). Sorak paid 1.9 trillion rupiah (S$380 million at the time) for a 51 per cent stake in BII. The BII acquisition came just after Temasek and Deutsche Bank acquired a 62 per cent stake in another Indonesian lender, Bank Danamon, earlier that year. Until then, Temasek's major investments had been mostly Singapore-centric. So BII, together with Danamon, marked the start of Temasek's overseas investments, as well as the beginning of its investments in foreign banks. Some questioned the acquisitions at the time, while others saw a political motive (buying the two banks, which were distressed entities restructured for sale by Ibra, was seen as contributing to Indonesia's recovery from the Asian crisis). But there was also a clear commercial imperative: It was a genuine opportunity to buy financial assets at attractive valuations with the potential for strong returns — a theme that would run through to the present time. Temasek went on to buy over Barclays and ICB's stakes in BII, and is estimated to have invested at least S$455 million in all in the bank. Then came one of the regulatory shifts that have become all too familiar to Temasek. New foreign ownership rules under the Indonesian central bank's single presence policy, which takes effect by the end of 2010, meant that Temasek had to reduce its Indonesian bank portfolio by half. Until late last year, the preferred option seemed to be a merger of BII and Danamon to meet the new rules. BII went as far as to say that it was drafting a proposal to merge with Danamon. The two banks complemented each other, said BII president-director Henry Ho. Early this year, however, Temasek indicated that it was selling its BII stake. Eventually, an agreement to sell the stake to Maybank for US$1.1 billion was announced in March. What led to the change of heart? First, it could be reflective of Temasek's growing caution, even disappointment, over the Indonesian market. The regulatory shifts and flip-flops in Indonesia, including that involving Temasek's telco investment Indosat, suggested that reducing its Indonesian exposure might be a prudent option. At the same time, while the financial sector in Indonesia appeared healthy, critics have charged that it was vulnerable to a sudden reversal of fortunes because of the inflow of hot money into the stock market and the spike, until recently, in international commodity prices. The second factor might hold some irony. If the path to Barclays and Merrill had started with BII and Danamon, then the decision to sell BII could also be traced to Temasek's push west-wards. Temasek's investments in Barclays and Merrill, beginning last year, signified a new global thrust beyond regional acquisitions. That meant realigning the portfolio, and raising funds for new investments by disposing of existing assets. There could be one more reason at play: the billions pumped into Barclays and Merrill, while undeniably long-term in nature, are currently sitting on huge paper losses. It would be nice to book a profit somewhere, and the sale of the BII stake to Maybank would have yielded a useful S$1 billion, according to some estimates. Of course, in the neighbourhood scheme of things, Malaysian central bank Bank Negara put the brakes on the deal last month. Apparently, it was worried that Maybank could suffer losses from overpaying (not unreasonable, given that the price is 4.7 times over book) for BII. It is still unclear how things would pan out, but as it is, it is a setback for Temasek. It is now forced to revisit its options for BII, including merging it with Danamon. And if Temasek continues to put the BII stake up for sale, it is unlikely to fetch a price as high as the one Maybank was willing to pay, given the circumstances. Another lesson in the realities of investing in the region then. No wonder even ailing US and European banks look so attractive. ************************************** Najib: Deal good for Maybank New Straits Times, October 2008 Maybank's decision to acquire a controlling stake in PT Bank Internasional Indonesia (BII) was made before the global economic downturn, Datuk Seri Najib Razak said. Therefore, he said, it was too late for Maybank to back out of the acquisition. Asked if the move was a good idea considering the current state of the global economy, the deputy prime minister and finance minister said the decision was a commercial one which was up to Maybank to decide on without government intervention. Najib, however, insisted that the move was still a good one for the country. "It (Maybank) will own the fifth largest Indonesian bank and become a regional bank," he said at the cabinet's open house at the Putra World Trade Centre on Wednesday. Maybank shelled out RM4.26 billion for a 55.6 per cent stake in BII on Tuesday. It was given a RM759 million rebate after the original price was deemed too high given the current economic scenario. The initial price was more than four times the book value of the bank, resulting in several parties demanding that a new deal, at two to three times the book value, be hammered out. Maybank stood to forfeit its RM480 million deposit from the original tender if it pulled out of the deal.
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