DBS bids to take over Bank Danamon

If successful, it will be the biggest bank takeover in Southeast Asia.

Singapore-based DBS Group Holdings Ltd. is offering to buy PT Bank Danamon Indonesia for some US$7.2 billion. Southeast Asia's largest bank intends to expand into Indonesia's high growth economy by acquiring control over a local bank with 3,000 branches and 6 million customers.

Analysts said DBS Chief Executive Officer Piyush Gupta is paying more than the median book value for banking deals over US$1 billion in an effort to diversify into Indonesia, Southeast Asia's largest economy.

Gupta said the deal will help DBS branch out from Singapore and Hong Kong.

DBS said it will pay its parent company, Singapore’s state-run Temasek Holdings Pte, US$4.9 billion in new shares for its 67% stake and buy the remaining stock from other shareholders for US$2.3 billion in cash. Temasek will increase its stake in DBS to 40.4% from 29.5%.

DBS will issue 439 million new shares at S$14.07 apiece to buy the stake from Temasek.

DBS noted that its 2011 revenue from South and Southeast Asia would have increased to 27 % from 7% with Danamon while its reliance on Singapore would drop to 49% from 62%.

The deal, if consummated will be DBS’s biggest purchase. It will exceed the US$5.4 billion DBS paid for Hong Kong’s Dao Heng Bank Group Ltd. in 2001.

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