After a hotly fought contest, the government of Indonesia has mandated UBS and Danareksa to advise it on the sale of Bank Permata. Local observers say a verbal mandate was given out on Friday, although nothing official has been announced yet and neither bank is able to confirm the mandate.
Other banks understood to be bidding for the Permata advisory role include CSFB, Merrill Lynch, Morgan Stanley and ABN AMRO.
The mandate could be perhaps the last of the big bank sales, a process that has been underway since March 2002 when IBRA sold its stake in BCA to the Farallon Consortium. Since then four further strategic stake sales have been completed for Bank Niaga, Bank Danamon, BII and Lippo Bank, as well as the IPOs of Bank Mandiri and Bank Rakyat Indonesia.
But in Permata, the government has one of its more colourful assets to sell. The bank was formed by the merger of three smaller banks into Bank Bali, which had been the first institution the government had tried to sell back in 1999. That sale to Standard Chartered ended in riots and corruption and Standard Chartered walked away from the deal. Now the new look Permata is back and looking for investment.
It is unclear at this stage what the exact structure of the deal will be. Under Indonesian law, Committee IX of the Indonesian House of Representatives must approve the structure of the sale before it can go ahead. Previous deals have seen the government sell a 51% stake to a strategic investor and then follow it with successive block trades straight into the secondary market. Analysts following the sometimes Byzantine workings of the Indonesian bank sales process believe that this time the same structure will be sought.
In previous weeks, however, there have been some suggestions in the Indonesian market that Bank Permata should merge with BNI, the state owned bank. The rationale is that Permata is strong in retail banking while BNI is strong in corporate banking. Together the two could be combined to form an institution, which the government could privatize for more than if it sold each separately.
This plan, however, seems to have been given short shrift. Due to concerns over the country's budget deficit, the government needs the sales proceeds soon and any merger and subsequent sale of a BNI/Permata would take time. It is further doubtful that a BNI/Permata combination could actually gain the government as much as a full sale of Permata, because BNI, as a state owned bank and not a nationalized bank, would have to remain majority owned by the government.
At present Permata is listed and has a market cap of Rp7.7 trillion ($852 million). However, the government owns 97% of the bank with only 3% of the shares freely traded in the public market. It is trading at Rp40 a share, which gives it a value of 13.33 times earnings, 4.52 times book value and 2.2 times its revenue.
The bank is running a net interest margin of 3.8%, a return on assets of 1.96% and a return on equity of 38.88%. In 2003 it made Rp3.1 trillion in profit up from Rp2.05 trillion a year before.
