STEPPING FORWARD WITH CONFIDENCE: Datuk Aminuddin (above) sees the deal as a strategic move that will extend Maybank's footprint in Indonesia, in line with the bank's regional expansion plans. -- PHOTOS: REUTERS, KEPPEL CORP

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The deal, announced yesterday, prices Indonesia's sixth-largest lender at a 23 per cent premium over its market value on Tuesday and may net a handsome gain of about $1 billion for Temasek.

The transaction ends months of speculation over what the Singapore investment company would do with its Indonesian banking investments after a new law was announced in 2006 that would bar investors from controlling more than one bank.

The new regulation, known as the 'single-presence policy', is set to take effect in 2010 and will prohibit any investor from owning stakes of over 25 per cent in more than one bank.

The new rule puts Temasek and several other foreign investors in a bind. Many had swooped in on the sector after it was hit badly by the 1997 Asian financial crisis.

OCBC Bank, which has a majority stake in Indonesia's Bank NISP, said it was not affected as its OCBC Indonesia unit was a joint venture with Bank NISP. United Overseas Bank plans to put its Indonesian arm and its major stake in Bank Buana into a single holding company.

Temasek holds an effective 42 per cent stake in BII through a joint venture with South Korea's Kookmin Bank, which is also selling its interest in BII to Maybank.

The Singapore company also owns 69 per cent of Indonesia's No. 5 lender, Bank Danamon. Up till December, Temasek was still hoping to satisfy the new rule by merging BII with Bank Danamon.

But last month, it said it was exploring the option of selling its BII stake instead, and two weeks ago, it shortlisted three buyers - Maybank, HSBC and Bank of China.

Back-of-the-envelope calculations suggest that Temasek could make investment gains of as much as $1 billion.

In 2003, it led a consortium consisting of Kookmin, Barclays and Swiss-based ICB Financial Group Holdings to buy 51 per cent of BII for two trillion rupiah, or $380 million then. Temasek is believed to have paid half of that sum.

It went on to buy over Barclays' and ICB's stakes late last year. It paid a reported $211.6 million to ICB, which suggests that it might have paid Barclays about $53 million as the British bank's stake was a quarter of ICB's.

On this basis, Temasek would have invested at least $455 million in BII, although the final figure is likely to be slightly higher as the consortium has raised its stake to 56 per cent over the years.

Apart from buying Temasek's and Kookmin's BII shares for a combined cost of US$1.5 billion, Maybank will also make an offer for the rest of BII's shares. All in, it could spend as much as US$2.7 billion on the takeover.

Analysts said Maybank's offer at 510 rupiah (8 Singapore cents) a share is generous. It prices BII at 4.7 times book value - about double the average valuation for Indonesia's publicly traded lenders, reported Bloomberg News. But BII's 230 branches and 700 ATMs will give Maybank a solid foothold in South-east Asia's largest economy, they said.

Maybank acting chief executive Aminuddin Desa said the deal is a 'huge step forward in regionalising our operations'.

'The Indonesian banking sector remains under-penetrated, with excellent long-term growth potential,' he added.

Mr Tow Heng Tan, a director of Fullerton Financial Holdings, which holds Temasek's BII shares, said: 'We have been most encouraged by the high level of interest in BII. This confirms our own optimism about the prospects for Indonesia over the longer term.'

bryanlee@sph.com.sg