DBS

DBS: Investors are betting that Indonesia will drive DBS Group Holdings Ltd. to abandon Southeast Asia’s largest bank takeover. Indonesia’s central bank last week gave approval for Singapore-based DBS, which bid $6.8b for all of PT Bank Danamon Indonesia, to buy only 40% of the company as the regulator pushes for Indonesian banks to have equal access in Singapore. With the agreement expiring in three days, Danamon is trading at a larger discount to its takeover price than any pending deal in Asia larger than $500m, according to data compiled by Bloomberg. While a minority stake in Danamon would cut DBS’s reliance on Singapore, which is Southeast Asia’s least lucrative lending market, Indonesian ownership laws can bar the bank from ever gaining full control. However, a minority stake doesn’t make sense for DBS, without the control to steer the business in the direction they would like. Brokers on the street are saying that the original deal, struck more than a year ago, assumed DBS would buy all of Danamon, and the terms must be changed before a smaller purchase is logical for DBS; or, the other option is for DBS to scrap the transaction altogether.