Reuters: Hot Stocks: UPDATE 1-Singapore's DBS shares fall after bid for Bank Danamon

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UPDATE 1-Singapore's DBS shares fall after bid for Bank Danamon Apr 3rd 2012, 02:06 Mon Apr 2, 2012 10:06pm EDT (Adds comments, background) By Harry Suhartono and Charmian Kok SINGAPORE, April 3 (Reuters) - Shares of DBS Group Holdings Ltd fell nearly 4 percent to a seven-week low on Tuesday, a day after announcing a plan to buy Bank Danamon Indonesia for $7.2 billion. Southeast Asia's largest bank, part-owned by Singapore's sovereign investment arm Temasek Holdings Pvt Ltd, said on Monday that it had agreed to take over Danamon in a cash-and-share transaction that would rank as Asia's fourth-biggest banking deal. The price - S$6.2 billion ($4.93 billion) in shares for Temasek and the rest in cash for minority investors - initially surprised some investors, with the offering at 7,000 rupiah ($0.77) per Danamon share, which last traded at 4,600 rupiah. But analysts said the deal would be positive for DBS in the longer term, as Danamon would significantly expand its footprint in Indonesia, Southeast Asia's largest economy, which recently regained investment grade status from ratings agencies. "The acquisition will diversify DBS' earnings base, and DBS expects to add significant value to Danamon in respect of funding franchise, corporate lending and consumer proposition - hence we are positive," brokerage OSK DMG said in a report. By 0145 GMT, DBS shares were down 2.6 percent at S$13.81, with more than 5.3 million shares changing hands, recovering from an intraday low of S$13.63. "The share-and-cash structure works as it keeps EPS (earnings per share) dilution and capital strain palatable," said CIMB in a report. The broker also said the merger would bring long-term synergies, but in the short term, DBS may see a lower return on equity. However, it maintains its outperform rating and target price of S$15.10. (Editing by Chris Lewis) Link this Share this Digg this Email Reprints

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