Amidst the current uncertain conditions circulating the volatile market and ever-changing economic and geopolitical landscape, the merging and acquisition of companies has been a prevalent occurrence lately. Prominent among the numerous lies Indonesia’s largest private lender, PT Bank Central Asia (BCA) who agreed to fully acquire the local unit of Dutch Rabobank for $20,5 million (Rp500 billion). This acquisition plan will be funded through BCA’s internal fund, and the purchase itself has successfully received approval from Indonesia Financial Services Authority (OJK). Additionally, the goal of the decision, as mentioned by BCA President, Director Jahja Setiaatmadja, was intended to support the company’s business development going forward. BCA is taking a step-by-step approach to embark on a digital transformation journey. As of last year, BCA also completed the acquisition of small-sized lender Bank Royal Indonesia for Rp 1.01 trillion as part of its plan to expand the digital banking business. Furthermore, BCA’s Chief Financial Officer, Vera Eve Lim, stated that BCA plans to launch a digital bank by the end of the first semester of this year.
Subsequent to the acquisition, there will be revisions within Rabobank’s operations as a result of the strategy devised for the newly created Rabo group which spotlights the food and agribusiness sector in Indonesia. Before implementing this policy (on 12/11/2019), Jahja Setiaatmadja had stated that when the transaction comes to fruition, Rabobank would join the BCA subsidiary entity. Following the acquisition, the first phase entails the closing down of several Rabobank branch offices. In the second phase, Rabobank Indonesia will also reduce banking products and services provided to customers.
As a secondary effect, the acquiring action by BCA to Rabobank had greatly affected the share price of BBCA and IDX Composite as a whole. On Tuesday (6/9), Muhammad Wafi, an analyst from Bahana Sekuritas, told CNBC that PT Bank Central Asia Tbk (BBCA) is one of the 4 biggest commercial banks based on business activities (Bank Umum berdasarkan Kegiatan Usaha--abbreviated as BUKU) in Indonesia and associated as "Unilever" in the banking sector. He also added by stating that BBCA is highly defensive and has a great amount of demand from foreign investors. At the closing of trade on Tuesday, BBCA was recorded to weaken by as much as 1.61%, closing at Rp.29,025 and by Wednesday (6/10), BBCA plummeted again by 1.46% and dragged down the IDX Composite by as much as 0.76% to below 5,000 at the unsettling level of 4,996.56, due to a large amount of market capitalization. BBCA itself became the "steering wheel" behind the depreciation of the IDX Composite alongside with 4 other issuers that also contribute in determining the IDX Composite on Wednesday: Bank Mandiri (BMRI), Bank Negara Indonesia (BBNI), Bank Rakyat Indonesia (BBRI), and Semen Indonesia (SMGR). Other than that, the decline from the banking sector was also caused by the profit-taking action from a foreign investor after a long rally two weeks ago.
Sources:
Forbes Indonesia
The Jakarta Post
CNBC Indonesia
What would you like to learn next week? Comment, Like, & Share!