DBS Bank has just launched the largest ever banking M&A deal in south-east Asia, offering more than SGD 7 bio to buy Indonesia’s Bank Danamon (which is 67% owned by Temasek, the SWF that also owns a one-third stake in DBS).
1) The hefty control premium – 50% above Bank Danamon’s pre-announcement price – means that DBS has effectively written a massive cheque to its own largest shareholder to get the deal done. Danamon’s market cap before it was suspended was 44 trillion IDR, valuing Temasek’s stake at IDR 29 trn – but Temasek will be getting shares in DBS worth about IDR 45 trn. The difference amounts to about SGD 2 bio flowing straight from DBS to Temasek.
2) DBS’s board must be pretty optimistic about Danamon’s potential earnings growth, because they just paid a 50% control premium and 18 times earnings for an earnings-per-share chart that looks like a flatlining coma patient: