Temasek Says Maybank Didn't Take Improved Offer

By Berni Moestafa and Soraya Permatasari

Sept. 27 (Bloomberg) -- Temasek Holdings Pte said it offered a S$236.4 million ($166 million) rebate to Malayan Banking Bhd. to improve the terms of an Indonesian stake sale, which wasn't accepted at yesterday's deadline for the transaction.

Temasek improved the terms for the controlling stake in PT Bank Internasional Indonesia after Malayan Banking or Maybank said the Malaysian central bank had blocked the $2.7 billion deal this week, on concern it would suffer losses as global asset prices fell. Maybank is Malaysia's biggest bank by assets.

The rebate is more than the 480 million ringgit ($140 million) deposit Maybank stands to lose by walking away from the acquisition yesterday. Temasek, which holds the stake through its unit Fullerton Financial Holdings, said it offered the rebate so Maybank would stick to the per-share price for the transaction.

``The offer was made by Fullerton in the interest of the minority investors in Indonesia'' and the rebate meant Maybank could ``proceed with its earlier commitment to make a tender offer at 510 rupiah as per the share sale agreement,'' Temasek's Fullerton said in a statement today. ``Fullerton will exercise all its rights under the share sale agreement.''

Temasek, Singapore's state-owned investment company with a $130 billion portfolio, said it will explore its options with South Korea's Kookmin Bank, which is jointly selling their controlling stake in Bank Internasional.

Central Bank's Orders

Maybank said in a statement dated Sept. 25 the Malaysian central bank ordered it to reduce the price or scrap the transaction, sparking a dispute with Indonesian authorities and a record slump in Bank Internasional's share price. Maybank's Chief Executive Officer Abdul Wahid Omar said in an e-mail today he's unable to comment at the moment, in response to a query on the status of the transaction.

Temasek said Maybank first asked for a one-month extension and a price reduction on Sept. 24, which it turned down a day later. It was informed of the objections by Bank Negara, or the central bank, on Sept. 25 at 11:32 p.m. local time, it said.

Bank Negara wanted Maybank to renegotiate the price, first offered by the Malaysian lender six months ago, after stocks tumbled amid the global credit crunch that forced Lehman Brothers Holdings Inc. into bankruptcy and prompted the sale of Merrill Lynch & Co. to Bank of America Corp. American International Group Inc. also agreed to turn over control to the U.S. government last week in exchange for a federal loan of as much as $85 billion.

Maybank's purchase price of 4.7 times book value, which was twice those of Indonesian banks at the time, was considered expensive by investors. That drove Maybank's shares 23 percent lower since the bid was first made.

`Uncertainty is High'

``Investors can buy companies at more attractive prices after valuations crashed following Lehman's bankruptcy,'' said Soni Wibowo, vice president of Jakarta-based PT Bahana TCW Investment Management, which manages about $864 million in assets. ``Global market uncertainty is high.''

Bank Negara cited the ``global financial turmoil'' when it demanded changes to the deal, according to Maybank.

Khazanah Nasional Bhd., Malaysia's sovereign wealth fund, is paying 2.5 times the book value of PT Bank Niaga and three times book for PT Bank Lippo as it buys the remaining shares of the two Indonesian banks in a proposed merger. Khazanah and its unit, like Temasek, are either selling one of the two banks they own or merging them to meet an Indonesian central bank deadline limiting ownership to just one local bank by 2010.

`Overly Estimated'

``Maybank may have overly estimated Bank Internasional's franchise value,'' Raymond Kosasih, an analyst with Deutsche Bank SA in Jakarta, said in a note to clients. ``We think that the real franchise value would have been a lot lower than our theoretical adjusted price'' of 390 rupiah a share.

Bank Internasional's shares plunged by a record 34 percent to 310 rupiah yesterday. Maybank shares were unchanged at 6.90 ringgit.

``You can't do this,'' Achmad Fuad Rahmany, chairman of Indonesia's market regulator, said in an interview in Jakarta yesterday. Renegotiating the price ``will cause losses to investors.''

A failed sale would underline the challenges in cross-border banking deals in Asia. HSBC Holdings Plc last week scrapped the purchase of Korea Exchange Bank, the second time it has abandoned attempts to buy a South Korean lender. Temasek itself was only selling Bank Internasional to meet Indonesian central bank regulations.

Malaysia's central bank has previously expressed concern that Maybank was paying too much. Bank Negara earlier blocked the transaction on concern a new Indonesian takeover rule will lead to losses at Maybank. The central bank reinstated its approval on Sept. 16 after the Indonesian regulator agreed to extend the timing for Maybank to comply with the new regulation.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Arijit Ghosh in Jakarta at aghosh@bloomberg.net