Temasek Holding is selling its Indonesian Bank Danamon stake to DBS Bank for $9.1b. It was reported that it paid $365m in 2005 for a 51% stake in Danamon. It has subsequently increased its stake. The cost of the additional stake was not disclosed but the $9.1b would definitely give it a substantial return on its investment. This is the kind of ‘bee tang’ transaction that every fund manager is looking forward to. One cannot be helped but to say that Temasek must be laughing to the bank, to DBS Bank actually, when the sale would give it an additional 439 million of new DBS shares. This would raise its stake in DBS from 29.5% to 40.4%. It is really a deal made in heaven.
The best part of the deal, DBS Bank is so happy paying a premium of 56.3% over last month’s market price. What a win win situation, with buyer and seller happy like fart. DBS will now be the 5th largest bank in Indonesia and a foothold in the hottest emerging market.
Temasek should try to duplicate this formula by buying more bank stakes from emerging countries and resell it to DBS Bank. DBS too should try to buy bank stocks from Temasek instead of other sources and not to repeat the same deal as Dao Heng which it was not too happy with.
The partnership between Temasek Holding and DBS Bank is unbeateable. And the formula is not easy to duplicate. The bottom line of Temasek will get a big boost with this sale.