HONG KONG/SYDNEY (Reuters) – Australia and New Zealand Banking Group Ltd (ANZ.AX), in its bid to expand its Asia footprint, has shifted its acquisition focus to Indonesia’s PT Bank Panin (PNBN.JK), according to sources, veering away from the beleaguered sale of South Korea‘s KEB (004940.KS).
Australia’s No. 4 lender is the front runner for a controlling $1.4 billion stake in Bank Panin, and has yet to put in a bid for the Korea Exchange Bank (KEB), sources with direct knowledge of the matter told Reuters, after the first round of bidding for KEB closed last month.
ANZ is putting all its resources behind securing the Panin deal while it’s having a second thoughts about the KEB process, one source said.
ANZ has hired Credit Suisse and Morgan Stanley as its adviser on Panin, the sources said. The sources declined to be identified because they were not authorised to speak publicly on the matter.
“Considering the two stakes that are reportedly now on the market, we would prefer ANZ take a further 46 percent in Panin than 51 percent in KEB,” Citigroup analyst Craig Williams said.
ANZ already owns a 38.5 percent stake in Bank Panin, Indonesia’s No. 7 bank. Purchasing the 46 percent stake on offer by the Gunawan family would give the Melbourne-based bank a larger chunk of its venture in Indonesia, a country seeing booming economic and consumer growth.
But the Australian bank having second thoughts about the $3.4 billion KEB stake adds pressure to the South Korea‘s No. 6 bank and its advisers who are struggling to drum up interest in the deal.
No bids have been submitted yet for the KEB stake, one source with direct knowledge of the sale said, though interest remains. The KEB stake owned by U.S.-based private equity fund Lone Star [LS.UL] has failed twice before to lock in a buyer.
ANZ hired JPMorgan and Goldman Sachs to advise on KEB’s 51 percent stake.
INDONESIA VS SOUTH KOREA
Citigroup’s Williams said ANZ can pay about 3 times book value to seal the Panin stake, versus the 1.5 time book for KEB due to the higher earnings growth likely for Panin.
ANZ, expanding across Asia in an effort to become a true, regional bank is still evaluating whether to bid for KEB or not, one of the sources said.
ANZ declined to comment on the bank’s plans.
What is clear to sources close to the bank, however, is that the ability to beef up its presence in fast-growing Indonesia is getting more attention over growing in South Korea through an acquisition.
Analysts say Panin is a strategic asset for ANZ while KEB is an opportunistic one. Mopping up the controlling stake in Panin, the seventh largest Indonesian bank, will boost its presence in a market which it sees as core.
On the other hand, Korea is an unknown market for ANZ. It’s a relatively mature market and does not offer similar trade flow business possibilities as some other Asian markets.
North Asia-based private equity MBK Partners is in early talks for a possible bid for KEB, a second source said. But for that interest to translate into an offer, the buyout fund would have to join hands with a local Korean bank.
MBK, with $3.7 billion in assets, could not be reached for comment.
ANZ has close to $5 billion in surplus capital.
“Integrating two acquisitions at the same time is pretty risky. I wouldn’t bet on Michael Smith to do that,” one of the sources said, referring to ANZ’s CEO.
KEB shares were up 1.2 percent, Bank Panin were up 1.8 percent, while ANZ fell 0.2 percent.