Jakarta fails to sell Bank Niaga


Investors at a recent conference in Hong Kong heard that the privatization push was moving ahead in Indonesia

Alex Frew McMillan and wire reports

JAKARTA, Indonesia -- Indonesia has confirmed it has cancelled the sale of a majority stake in Bank Niaga due to low-priced bids.

The Indonesian Bank Restructuring Agency (IBRA) was selling 51 percent of Bank Niaga, part of reforms pushed by the International Monetary Fund.

But the government received only two full bids on the bank. Indonesia's finance ministry has now scrapped the sale, saying the bids were too low at between 20 and 30 rupiah per share.

Lukita Dinarsyah Tuwo, Secretary of the Financial Sector Policy Committee, said the auction "is canceled because the offering price was below market price."

Pushing ahead with other mechanisms

The government is looking to push ahead with the sale through other methods.

"IBRA will study the mechanism to reach the optimal result according to expectations," Lukita told reporters Monday.

Stock-market players in Jakarta had been expecting the sale to fail. Indonesia's reform chief, Laksamana Sukardi, in late May conceded that the bids were low.

Bank Niaga stock is down 6.7 percent at 70 rupiah in Monday afternoon trade. Analysts contend the price is so high because the free float of stock is just 3 percent, with the government owning the rest.

J.P. Morgan wrote in an April report that Niaga is worth around $120 million, although the market value of the bank approaches $1.2 billion.

Indonesian stocks are lower, the Jakarta composite index off 0.49 percent at 511.52. But the losses stem mainly from uncertainty after two bombs went off in the Indonesian capital. Four people were killed by two blasts in Jakarta's Chinatown area.

The rupiah is trading stronger on Monday, at 8,830 to the U.S. dollar. That's compared to the 8,970 level it was trading at early on Friday.

Panin Bank and ANZ Banking Group told CNN in late May that they were not going to raise their price (full story).

Malaysia-based Commerce Asset-Holding Berhad led the other team in the running for Niaga.

No deadline for sale

Indonesia nationalized almost all its banks in the wake of the Asian financial crisis. The International Monetary Fund has pushed the Niaga sale, which was due to close this month.

Though the failure of the Niaga auction is not expected to have long-lasting effects, the IMF also demands that Indonesia sell off Bank Danamon and Bank Lippo this year.

Indonesia has succeeded only in selling off a majority stake in Bank Central Asia, the country's largest retail bank.

"No deadline is set for IBRA, but we are efforting to sell Niaga this year," Lukita said.