Mizuho Said to Face Board Seat Snag in ANZ Panin Stake Talks

Jan 24, 2014 2:54 am ET

(Updates with analyst comment in fourth paragraph.)

Jan. 24 (Bloomberg) -- Australia & New Zealand Banking Group Ltd.’s attempt to sell its 39 percent stake in PT Bank Pan Indonesia to Mizuho Financial Group Inc. is being held up by a dispute about board representation, three people familiar with the matter said.

The Gunawan family, which controls the lender known as Bank Panin, is resisting Mizuho’s demand for a board seat should it buy ANZ’s holding, valued at about $520 million, said the people, who asked not to be named as the talks are private. Mizuho and ANZ are also negotiating other terms for a deal, one person said without elaborating.

Mizuho lags behind bigger competitors Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., who have both announced acquisitions in Southeast Asia in the past year. ANZ Chief Executive Officer Mike Smith said in April that stricter capital rules may force the lender to review minority partnerships.

“If Mizuho can’t get a board seat, the purchase may end up being a pure investment,” Shinichiro Nakamura, an analyst at SMBC Nikko Securities Inc. in Tokyo, said by phone. “If Mizuho can’t foresee expanding businesses together with Panin, it doesn’t make much sense for the Japanese bank to spend the money.”

ANZ doesn’t have any representation on Panin’s four-member Board of Commissioners, according to the Indonesian lender’s website. Spokesmen for ANZ, Mizuho and Panin declined to comment or weren’t immediately available.

Lower Returns

Melbourne-based ANZ bought 10 percent of Panin in two stages in 1999. A decade later, the Australian lender paid $114 million to boost its stake in a transaction that valued Panin at 745 rupiah a share. Panin closed yesterday at 670 rupiah in Jakarta. ANZ also owns a separate Indonesian unit with 28 branches spread across 11 cities, according to its website.

Shares of Panin, the ninth-largest by assets of the country’s 120 commercial banks, fell 0.8 percent in Jakarta trading to 665 rupiah as of 2:21 p.m. The lender trades at 0.9 times its book value, compared with 2.1 times for the Jakarta Finance Index and at least 2.5 times for the country’s three biggest lenders, according to data compiled by Bloomberg.

Panin’s return on equity is lower than larger competitors like PT Bank Mandiri and PT Bank Rakyat Indonesia because it doesn’t have a sizable presence in microfinance and hasn’t grown its mortgage lending as quickly as hoped, Syaiful Adrian, an analyst at PT Ciptadana Securities in Jakarta, said by phone.

Japan Shrinking

Panin’s shares have climbed 12.7 percent in in the past 12 months, giving the company a market value of 16 trillion rupiah ($1.3 billion). The Gunawan family controls 46 percent of the Jakarta-based lender through PT Panin Financial Tbk.

Japan’s biggest banks have relied on overseas takeovers as a shrinking population and benchmark interest rates near zero constrain loan profitability at home. Mitsubishi UFJ in July offered to buy a majority stake in Thailand’s Bank of Ayudhya for $5.6 billion. Sumitomo Mitsui struck a deal to buy 40 percent of Indonesia’s PT Bank Tabungan Pensiunan Nasional for about $1.5 billion in May.

Limiting Indonesia’s appeal, the country in July 2012 introduced a rule that limits foreign banks’ stakes in local lenders to 40 percent. That prompted Singapore-based DBS Group Holdings Ltd. to end its $6.5 billion bid for PT Bank Danamon Indonesia in August.

ANZ owned minority stakes in six Asian companies valued at a combined A$4 billion ($3.5 billion) as of September 2012. It valued its Panin stake at A$692 million in 2013, according to its annual report. New banking rules require the Australian lender to subtract the entire value of the overseas minority investments from Tier 1 capital, up from 50 percent before.

ANZ aims to nearly double earnings from outside Australia and New Zealand to as much as 30 percent by 2017. It is expanding in Asia in areas such as trade finance and cash management.

--With assistance from Monami Yui in Tokyo and Harry Suhartono and Berni Moestafa in Jakarta. Editors: Ben Scent, Philip Lagerkranser