Jakarta – US investment firm Farallon has won the bidding to buy Bank Central Asia (BCA), Indonesia's largest retail bank, the government said Thursday.
State Enterprises Minister Laksamana Sukardi said the consortium led by Farallon Capital Management would buy a 51 percent stake in two stages for a total of 5.3 trillion rupiah (531.6 million dollars) at 1,775 rupiah a share.
The bank was taken over by the state Indonesian Bank Restructuring Agency (IBRA) in the wake of the 1997-1998 regional financial crisis, which devastated the local banking sector.
Its sale, after several false starts in recent years, is seen as a crucial test of Indonesia's resolve to reform its banking industry and push ahead with a divestment programme to help plug its budget deficit. Analysts said the sale could revive flagging interest by overseas investors in the country.
The choice is a bitter blow to Standard Chartered Bank, the other final bidder. It was the second time in less than three years that the British-based giant had failed in its bid for a local bank. "The sales and purchase agreement criteria offered by Farallon are better than those of Standard Chartered," Sukardi said.
BCA has 800 branches and 22,000 employees. IBRA took it over from the Salim Group three years ago and holds around 60 percent of the shares. "The government recognises that the BCA divestment is a strategic footstep in improving public and business confidence with regard to the policy on economic revovery," Sukardi said.
"Therefore the government understands the importance of strengthening the sales and purchase agreement and business plan of the winning bidder in a way that will create a strategic partnership in developing BCA as a benchmark of national banking."
Farallon, he said, should improve BCA's ability to channel sorely-needed bank credit to local business, including small and medium-size enterprises.
Apparently mindful of mass worker protests this week against the sale, the minister said there should be a "strong commitment to develop the current resources and there should not be any rationalisation that would create a negative impact on BCA's performance."
Earlier Thursday, before the winner was announced, some 400 people staged a noisy protest outside the head office of Stardard Chartered against the planned sale.
Standard Chartered executives could not be reached for comment. Widespread protests helped scuttle its bid in 1999 for Bank Bali.
The sale of BCA is one of the conditions set by the International Monetary Fund, which is coordinating an five-billion-dollar economic bailout program. Foreign creditors are pushing Indonesia to press on with privatisation and divestment of assets held by IBRA but some politicians had come out strongly against the BCA sale.
Previous attempts to sell BCA, which has 22,000 employees, foundered due to interference from legislators. The failure was a major reason why the IMF suspended its lending programme to Indonesia in December 2000. The programme resumed last year.