BANK PDFCI TO MERGE WITH BANK DANAMON.
In the case where the Extraordinary General Meetings of Shareholders of the two banks agree, Bank Danamon will survive the merger while Bank PDFCI will dissolve itself without undergoing a liquidation process. Therefore, the bank resulting from the merger will retain its name: PT Bank Danamon Indonesia Tbk.
Shareholding composition to change
If the plan on the merger between Bank PDFCI and Bank Danamon is implemented, this will not only change the shareholding composition and capital structure of the surviving bank but also improve its financial performance and soundness level.
Currently, the two banks' series-B shares are majority-owned by IBRA as a result of the latter's April 1998 acquisition of the former. Furthermore, both Bank PDFCI and Bank Danamon are publicly listed and, as such, they are also partly owned by the public on the capital market. However, in terms of their series-A shares, Bank Danamon is 0.49% owned by PT Bank Danamon International while Bank PDFCI is 0.53% owned by six shareholders.
In line with the outcomes of the due diligence process and with the agreement which has been made, the merger will result in the ownership of shares by each of the shareholders in the surviving bank being dilluted in proportion to the percentage of their share ownership in each of the merged banks. Since the intrinsic value of every share issued by both banks is the same, the basis for the calculations used in converting PDFCI shares into Danamon shares will be the volume of shares owned in Bank Danamon and in Bank PDFCI, irrespective of any share classifications or of the nominal value of each share.
With the assumption that the composition of shareholders following the merger will be the same as it is now, the ownership by each shareholder of shares in the surviving bank will be smaller that it is now both in terms of volume and in terms of value.
Table - 1
Shareholding composition of Bank Danamon and Bank PDFCI before and after merger
Volume of Value of shares shares Detail (million share) (Rp billion) A. Before merger Bank Danamon. Series-A shares with a nominal value of Rp 500 - PT Bank Danamon International 1,075.2 537.6 - Public 1,164.8 582.4 Series-B share with a nominal Rp 5 - IBRA 215,030.8 1075.1 - Public 9.1 0.05 Total 217,280.0 2,195.2 Bank PDFCI. Series-A shares with a nominal value of Rp 1,000 -PT Bahana Investa Argha Tbk 56.2 56.2 -PT Pan Indonesia Bank Tbk 15.6 15.6 -PT Lippo Bank Tbk 14.1 14.1 -The Nippon Credit Bank Ltd 13.7 13.7 -Good Spirit Investment Corp 11.8 11.8 -Bank Indonesia 10.9 10.9 -Public 65.2 65.2 Series-B share with a nominal value of Rp 5 -IBRA 22,499.8 112.5 -Public 0.2 0.0 Total 22,687.5 300.0 B. After merger Series-A share with a nominal value of Rp 500 - PT Bank Danamon International 1,075.20 537.60 - Public 1,164.79 582.40 Series-B share with a nominal value of Rp 5 - IBRA 260,030.49 1,300.15 - PT Bahana Investa Argha 112.43 0.56 - PT Pan Indonesia Bank Tbk 32.16 0.16 - PT Lippo Bank Tbk 28.14 0.14 - The Nippon Credit Bank Ltd 27.48 0.14 - Good Spirit Investment Corp 23.65 0.12 - Bank Indonesia 21.78 0.11 - Public 139.87 0.70 Total 262,655.00 2,422.07 Ownership (%) Detail A. Before merger Bank Danamon. Series-A shares with a nominal value of Rp 500 - PT Bank Danamon International 0.49 - Public 0.54 Series-B share with a nominal Rp 5 - IBRA 98.96 - Public 0.01 Total 100.00 Bank PDFCI. Series-A shares with a nominal value of Rp 1,000 -PT Bahana Investa Argha Tbk 0.25 -PT Pan Indonesia Bank Tbk 0.07 -PT Lippo Bank Tbk 0.06 -The Nippon Credit Bank Ltd 0.05 -Good Spirit Investment Corp 0.05 -Bank Indonesia 0.05 -Public 0.29 Series-B share with a nominal value of Rp 5 -IBRA 99.16 -Public 0.01 Total 100.00 B. After merger Series-A share with a nominal value of Rp 500 - PT Bank Danamon International 0.41 - Public 0.44 Series-B share with a nominal value of Rp 5 - IBRA 99.00 - PT Bahana Investa Argha 0.04 - PT Pan Indonesia Bank Tbk 0.01 - PT Lippo Bank Tbk 0.01 - The Nippon Credit Bank Ltd 0.01 - Good Spirit Investment Corp 0.01 - Bank Indonesia 0.01 - Public 0.06 Total 100.00
Source: Data Consult
Paid-in capital to increase
In addition to the entry of Bank PDFCI's assets, shares, and liabilities into Bank Danamon, another topic which will be discussed during Bank Danamon's Extraordinary General Meeting of Shareholders is the possibility of increasing the bank's issued and paid-in capital by capitalizing on the spread in value between restructuring transactions. According to the plan, the proceeds of these transactions will be in the form of bonus shares which will be distributed among the surviving bank's shareholders on a proportional basis.
Within the context of issuing new shares, Bank Danamon also requires that its by-law be amended to allow it to increase its authorized capital. In the upcoming merger, every PDFCI share will be replaced with a Bank-Danamon series-B share. Therefore, Bank Danamon's plan to increase its authorized, issued, and paid-up capital will affect only its series-B shares.
The brief prospectus concerning the merger of the two banks shows that Bank Danamon's authorized capital will be increased from Rp 2.2 trillion in 218 billion shares (prior to merger) to Rp 9.7 trillion in 1.7 trillion shares. On the other hand, its issued and paid-up capital will be increased from Rp 2.2 trillion in 217 billion shares to Rp 2.4 trillion in 262 billion shares.
Table - 2
Bank Danamon's shareholding composition before and after merger
Before merger Volume of Nominal shares value Details (million share) (Rp bill.) Authorized capital - Series-A (Nominal value Rp 500) 2,240.0 1,120.0 - Series-B (Nominal value Rp 5) 216,000.0 1,080.0 Total 218,240.0 2,200.0 Issued and paid-up capital - Series-A (Nominal value Rp 500) 2,240.0 1,120.0 - Series-B (Nominal value Rp 5) 215,040.0 1,075.2 Total 217,280.0 2,195.2 After merger Number of Nominal shares value Details (mill. share) (Rp bill.) Authorized capital - Series-A (Nominal value Rp 500) 2,240.0 1,120.0 - Series-B (Nominal value Rp 5) 1,713,660.0 8,568.3 Total 1,715,900.0 9,688.3 Issued and paid-up capital - Series-A (Nominal value Rp 500) 2,240.0 1,120.0 - Series-B (Nominal value Rp 5) 260,415.0 1,302.1 Total 262,655.0 2,422.1
Source: Data Consult
Liquidity and solvability improve
As has been mentioned earlier, one objective of the merger between Bank Danamon and Bank PDFCI is to increase the former's capital structure so that it can eventually become a core bank. Another objective is to improve Bank Danamon's efficiency through the resulting synergy so that the bank can achieve its economy of scale. One indicator of successful synergy is an improvement in liquidity, rentability, and solvability.
The banking sector's end-of-May 1999 financial data show that both Bank PDFCI and Bank Danamon, in addition to other banks, have been suffering considerable financial losses, resulting in their rentability being very poor. However, since the total value of Bank PDFCI's liabilities is much smaller than that of Bank Danamon's, the liquidity and solvability of the former are better than those of the latter.
If the merger between the two banks had taken place late in May 1999, some improvement would have been achieved in terms of the surviving bank's financial performance. Bank Danamon's liquidity level would have increased from only 113.8% prior to the merger to 122.4% after the merger, indicating better liquidity. Similarly, its solvability level would have dropped slightly from 894.4% to 890.6%, indicating better solvability.
Table - 3
Bank Danamon's financial data before and after merger if the merger had been taken place in end of May 1999 (Rp billion)
Bank Bank Bank resulting Details PDFCI Danamon from merger Total assets 2,256.2 30,417.5 32,673.7 current assets 2,219.6 26,247.8 28,467.4 Fixed assets 7.9 204.8 212.6 Other assets 28.8 3,964.9 3,993.7 Total liabilities 2,016.7 27,358.7 29,375.4 Current liabilities 192.9 23,072.1 23,265.0 Loans received 1,296.5 2,572.1 3,868.6 Other liabilities 527.3 1,714.5 2,241.8 Equity 239.5 3,058.8 3,298.3 Interest income 57.0 1,380.9 1,437.8 Interest cost 329.8 4,777.3 5,107.0 Net interest income (272.8) (3,396.4) (3,669.2) Operating profit (117.7) (5,256.0) (5,373.7) Net profit (107.6) (5,243.9) (5,351.5) Ratios (%): - Current assets/current 1150.6 113.8 122.4 liabilities - Net profit/total assets (4.8) (17.2) (16.4) - Net profit/total capital (44.9) (171.4) (162.2) - Total liabilities/equity 842.0 894.4 890.6 - Net income/total assets (12.1) (11.2) (11.2)
Source: Data Consult3
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|Comment:||BANK PDFCI TO MERGE WITH BANK DANAMON.|
|Publication:||Indonesian Commercial Newsletter|
|Date:||Aug 24, 1999|
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