Tuesday, April 3, 2012

Gupta's Expensive Buy

We should be used to this kind of incestuous deals by now. DBS pays $9.1 billion to buy 67% of Bank Danamon Indonesia, the stake which is held by Temasek Holdings. What is the message here? That Danamon will perform better under ownership of DBS, or Temasek is tired of Danamon's record of returns since its acquisition in 2003?

Critics are already saying India import Piyush Gupta overpaid - a premium of 56.3 percent over last month's average share price. Another big spender, foreign talent Philippe Paillart, blew $10 billion for Dao Heng Bank in 2001, an investment DBS had to write down twice. Bank Danamon's shares surged 50 percent at the news, meaning Gupta will be blowing more money to acquire the outstanding shares. From whence did DBS and Temasek get its original seed money in the first place - you know the answer to this one.

The real interesting bit is to come - we are talking about the country that refused to sell us sand, and still pissed off with the extradition impasse of crooked businessmen parking their ill gotten funds here. Reuters are already reporting that some Indonesian bankers would try to block the deal and were considering a media campaign targeting public opinion in the hope of influencing politicians.

"You're going to see some movements to halt this deal in the coming days," said a senior executive of a rival local bank, who asked not to be named because of what he called the sensitivity of the issue. "This is about nationalism. We don't have to be afraid of Singapore ... We're going to raise this case to parliament, the central bank and (banking regulator) Bapepam," he added.

Bankers and industry analysts generally agree there is little scope for a rejection of the deal on strict regulatory grounds, but a politically focused campaign could prove unpredictable. Looks like there are going to be more excuses to delay the Hougang by-election.


  1. Mr Gupta probably have a mandate or KPI to complete a M&A soon.
    But you have to wonder...why else do they need to go behind the back and buy it from Temasek, instead of outright acquisition or takeover?

    Me thinks - another shin-corp deal in the remaking.

  2. i hope they dont loose money if not singaporeans will pay extra tax to goverenment

  3. Ha ha ha...merely means Temasick looking for profits..things must be looking really tough in corporate land when you need to flip to your underlings

    1. I can't believe what a Ponzi scheme Ho Jinx is running

  4. Looks like simple way of transfering money from DBS to Tamasek. This way, Tamasek can boast its ability to make extraordinary profits. But hang on, its a matter of right to left pocket. Is there a real profit?

    1. You are right. Temasek's Total Shareholder Return in 2011 was 4.60%, below target by $8.8 billion. With this deal the TSR for 2012 will be closer to their goal of 17% compounded annually. It's taking from one to make the other look good. Look at who are on the boards of both Temasek Holdings and DBS Group.


      The question to ask is, if Temasek Holdings, using money borrowed from our CPF, is earning so much, why are we paid only 2.5% in our CPF?

  5. Wonder if it was Gupta who made the decision to purchase.
    Still, win or lose, Gupta will get paid monthly.

    I'm just glad to see that Temasek (taxpayers) is getting rid of another bank.

    Yeah right.
    After just a decade, Indonesia is now suddenly the next greatest banking growth opportunity.

    Just glad that it's DBS shareholders and not the Singapore taxpayers that will be given this great opportunity.

  6. Fantastic article.

  7. They just never learn. They have this wonderful reputation among investment circles of being in the habit of over-paying on their investments. They are always suckers.

    Sad to say that what they lose, they will compensate by squeezing us more! This is a vicious circle!

  8. Please advise - In essence -

    1. Dbs issues shares for purchase - no cash involved in the Temasek deal. For minority shareholders - cash plus shares deal.

    2. This deal is akin to father sell to son at at 56.3 % premium over Mkt price.

  9. Tattler says: Temasek is tired of Danamon's record of returns since its acquisition in 2003?

    I am not a financial expert, but I think this is not the case. I understand when Temasek bought PT Danamone in 2003 it paid around US$410 or maybe more(please correct me if I am wrong) through a subsidiary Fullerton Financial Holdings in which Deutchbank has a share. By selling now at S$9.1 billion (56.3% premium over mkt price) to a very willing partner it has made a killing. It not only locks in this profit but divests itself of direct ownership of Danamone. Very good deal for Tamesek, don't you think, as it boosts it's bottomline for 2012. As for how good it is to DBS, it's left to be seen. Don't forget Temasek also holds shares in DBS which will go up to 40%, so indirectly they still own Danamone. Since the price of DBS has dropped, the actual S$9.1 billion will be less on paper. Extra bonuses for Temasek staff?

    I already commented:
    Anonymous Apr 3, 2012 09:54 PM

  10. Seriously, this is left pocket to right pocket what is there to shout about?

    And if you hear the news that DBS will also next buy 14% stake from Malaysia Alliance Finance group for $270m, again, from Temasek..you have to wonder why this go about way to inflate the portfolio earnings of SWF while making another local CEO looks good..

    Whatever happens to DBS - "Don't Be Singaporeans"

    Apparently this CEO can't do a direct buy/takeover without going through the mothership.

  11. http://josh.sg/2012/04/two-thoughts-on-the-dbsdanamon-deal/

  12. It only gives me the impression that something fishy is happening, no ? Remember the old man once said that their investments are meant for the long term ? So why ?

    Maybe Temasek needs to lock in some profits in order to cover up some big losses, who knows ?