January 29, 2018 / 11:18 AM / 10 months ago

UPDATE 1-Japan's SMFG seeks Indonesia deal that may pave way for higher BTPN stake

* BTPN says assessing SMFG proposal to merge SMFG’s unit with it

* SMFG has said it is keen to raise stake in BTPN to a majority

* BTPN shares surge 25 pct on Monday (Adds comments of SMFG and BTPN executive)

By Cindy Silviana and Taiga Uranaka

JAKARTA/TOKYO, Jan 29 (Reuters) - Japan’s Sumitomo Mitsui Financial Group (SMFG), which is eyeing raising its stake to a majority in Indonesian lender BTPN, has proposed to merge its subsidiary in the Southeast Asian nation with the mid-sized bank.

PT Bank Tabungan Pensiunan Nasional (BTPN) said on Monday it was conducting an assessment and technical preparation on a proposal by SMFG to merge with PT Bank Sumitomo Mitsui Indonesia.

SMFG owns 40 percent of PT Bank Tabungan Pensiunan Nasional (BTPN) and the Japanese lender’s CEO said last month the company is keen to raise its stake to a majority in BTPN if Indonesian authorities permit.

Some analysts said the move could ultimately result in a higher stake for SMFG in BTPN. “There’s a possibility that the merger would trigger a tender offer for BTPN’s shares,” said Henry Wibowo, an analyst with broker Bahana Securities in Jakarta.

An SMFG spokesman confirmed it had asked BTPN to consider a merger with its local unit in which the Japanese lender owns 98.5 percent. The combined assets of the two would amount to around $12 billion.

BTPN said in a statement to the Indonesia Stock Exchange that a “merger is in line with the direction of the Financial Services Authority (OJK) in order to consolidate the financial sector which is expected to improve efficiency and maximise the synergy of the financial sector in Indonesia.”

Indonesian authorities are pushing for a consolidation among the nation’s 120 banks to boost the sector’s efficiency.

Details of a merger, including the value of any transaction, were yet to be decided, Anika Faisal, a director at BTPN, told reporters in Jakarta.

“About the change in shareholders’ (portions), it is yet to be decided, but it is very possible that share ownership would be diluted,” Faisal said.

The SMFG spokesman said a merger would be complimentary given BTPN’s strength in retail business and SMFG’s strength in wholesale. The spokesman said nothing had been decided on raising SMFG’s stake in BTPN.

After the announcement, shares of BTPN on Monday extended earlier gains to end the day up 25 percent.

Faisal said that there was no plan to sell shares under a merger.

BTPN had total consolidated assets of 91.37 trillion rupiah ($6.86 billion) by the end of September, while Bank Sumitomo Mitsui Indonesia had 68.58 trillion rupiah.

BTPN would discuss the merger plan with Indonesia’s financial regulator (OJK), Faisal said. It would require due diligence and a shareholders’ meeting for approval, she said.

A banking supervisory official at OJK said it had not yet received a request for a merger.

$1 = 13,326 rupiah Reporting by Cindy Silviana in JAKARTA and Taiga Uranaka in TOKYO; Writing by Fransiska Nangoy; Editing by Ed Davies and Muralikumar Anantharaman

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