DBS quits bid for Indonesia's Bank Danamon

Is it abandoning expansion plans in Indonesia?

According to OSK, DBS issued a statement yesterday that the long-stop date for the acquisition of Bank Danamon is 1 Aug 2013, and the conditional share purchase agreement will lapse thereafter.

While it is unclear whether official written notification was received from Bank Indonesia, DBS appears to be taking the middle ground by allowing the share purchase agreement to lapse, in OSK's view.

Here's more:

We think the more positive outcome would have been BI approving DBS’ acquisition of a majority stake while acquisition of a 40% stake in Danamon could have led to an overhang due to lingering uncertainties regarding the lack of control as well as whether DBS would eventually be allowed to hold a majority stake in Danamon.

The latest development does raise some questions with respect to DBS’ longer term strategy for Indonesia, although DBS said it remains committed to Indonesia and will continue to invest and grow the franchise there.

DBS also said that it remains open to opportunities as they arise. We are Neutral on the latest development and await further details from the conference call later today, which will discuss the announcement and the 2Q13 results. We have a BUY on the stock with a TP of SGD18.70.

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