The Deposit Insurance Corporation (LPS) confirmed that the Financial Services Authority (OJK) had approved J Trust Co Ltd—a Japanese investment company which controls 10% shares of Tahir’s Bank Mayapada—to acquire 99.996% shares of Bank Mutiara (current name of Bank Century) for a confidential price.

J Trust’s acquisition of Bank Mutiara, which has been a subject to legal and political issues in the country due to the Rp8 trillion bailout fund injected by LPS to the bank, has raised the question: is this purely business, or is this something more?

The LPS said that J Trust passed the fit and proper test for the acquisition of PT Bank Mutiara Tbk (BCIC) from the agency. LPS also stated that it had received an approval letter from the OJK on Monday (Nov. 10) paving the way for the acquisition.

The LPS selected J Trust as the successful bidder for the acquisition of Bank Mutiara on Sep. 12, 2014. The Japanese company beat  Bank Rakyat Indonesia (BRRI) and Tommy Winata’s Artha Graha Group to the deal. But how come?

J Trust is expanding its business in Indonesia. The company had previously entered into a strategic operational alliance between Bank Mayapada (MAYA) and J Trust Asia Pte Ltd—the group’s subsidiary in Singapore. J Trust acquired 10% shares in Bank Mayapada for USD7 million.

Bank mayapada itself is a subsidiary of the Mayapada Group, controlled by Tahir, the son-in-law of Mochtar Riady, founder of Lippo Group. Theo L Sambuaga, the Deputy Chairman of Golkar Party, is currently CEO of Lippo Group, whereas another Deputy Chairman of Golkar Agung Laksono is known for his close relationship with Tahir. Since Tahir was, for many years, a special staff for Agung Laksono at the Coordinating Ministry for People’s Welfare.

Tahir has been everywhere in the past few months, in line with the change of the regime. He was appointed as the special advisor for the Indonesian military. And later, through his Tahir Foundation, the tycoon awarded a Lifetime Achievement Award to Fifth President of the Republic Megawati Soekarnoputri, the chairwoman of the Indonesian Democratic Party of Struggle (PDI-P).

Those who believe that J Trust’s acquisition of Bank Mutiara is purely business, point to a possible consolidation of Bank Mutiara with Tahir’s Bank Mayapada. But it is not yet clear whether Tahir is a part of J Trust’s consortium in the acquisition of Bank Mutiara. It is also unclear whether J Trust will eventually acquire more shares in Bank Mayapada and then merge Mayapada and Mutiara. But we may find clarity very soon.

That being said, the acquisition of Bank Mutiara might be taken as a good news since this is the last year for LPS to divest or sold Bank Mutiara to a potential buyer. By way of regulation, the LPS must sell Bank Mutiara within three years since take over (in late 2008), with a possible two-year extension. The LPS had repeatedly offered its shares in Bank Mutiara to investors but failed to attract potential buyer until J Trust.

It’s unfortunate that the LPS has not yet revealed the price J Trust paid. But our source, who is familiar with the deal, said that the confidential price was set at 4-5 trillion rupiah. Our source said that J Trust paid 10 percent as down-payment.

If the information from our source is correct, then the LPS would’ve failed recover the bailout funds to Bank Mutiara—the amount of the bailout for what was then known as Bank Century was Rp6.7 trillion, the second bailout package Rp1.25 trillion was disbursed in December 2013, bringing the total of the bailout to the sum of Rp8 trillion.

LPS should have secured a minimum of Rp6.7 trillion. Otherwise, there would be reasons for the KPK to investigate the deal and for the House of Representatives (DPR) to scrutinize the deal. And sure enough, the KPK has responded to the deal.

Talking to the press on Wednesday (Nov. 12), KPK Deputy Chief Busyro Muqoddas shared his concern on the disparity between the bailout value of Bank Century/Mutiara and the acquisition price. Busyro, moreover, said that the KPK will look into the acquisition soon after the OJK finishes its verification and the Supreme Audit Agency (BPK) is done with its audit on the acquisition.

We have shared our doubts on there being an investor willing to pay Rp8 trillion, or indeed Rp6.7 trillion, for acquiring Bank Mutiara. And now this deal has gone through, it will be interesting to see what will happen in the future as a consequence of the deal.

 

By Haryanto Suharman

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