25 December, 2014

Singapore Bank Mergers & Acquisitions (DBS Group Holdings)

A DBS bank branch in Hong Kong.  Hong Kong is currently DBS' biggest market outside of Singapore.

DBS Group Holdings Ltd.

The Development Bank of Singapore (DBS) was established in 1968 by the government to nurture the young island nation’s fledgling industries. The idea to establish such a state-owned economic development bank was actually recommended by a UN report commissioned by the Singaporean government.

Financial assistance offered by DBS included ordinary commercial loans, equity participation (i.e. merchant banking) as well as loan guarantees.  During the 1970s, DBS also began to engage in retail banking operations.  DBS began to seriously expand outside of Singapore in the 1990s and hope to establish itself in neighbouring countries such as Indonesia, Thailand, Hong Kong and the Philippines.

In 1999, the Singapore government removed restrictions of foreign shareholdings on Singapore-incorporated banks. DBS promptly eliminated the distinction between its “local” shares and “foreign” shares to allow foreign investors freer access to DBS shares.  For many years, DBS had been indirectly, majority-owned by the Singaporean government, but by 2014, over 70% of DBS is now owned by the public, with the Singaporean government retaining the rest.

Recent transaction(s):

  • In 1997, DBS established a subsidiary in Indonesia.  Due to tight control by Indonesia on foreign banks, DBS only had three branches in Indonesia by 2004.
  • In 1998, DBS bought POSbank (formerly the Post Office Savings Bank) for SGD $1.6-billion, gaining significant market share.
  • In 1998, during the Asian financial crisis that began in Thailand, DBS subscribed to a new share issue of the ailing Thai Danu Bank for THB 6-billion and gained a 50.3% stake. 
  • In 1998, DBS bought 60% of the Philippines’ Bank of Southeast Asia for an immaterial amount.  The bank was renamed DBS Philippines.
  • In 1999, DBS acquired a 7.4% stake in the Philippines’ Far East Bank & Trust Company, which was being merged into the Bank of the Philippine Islands (BPI).  Following the merger, DBS’s stake in BPI was 2.4%.
  • Later in 1999, DBS bought a further 19.7% stake in the Bank of the Philippine Islands (BPI) for SGD $1.2-billion.  The purchase was part of DBS’s strategy to make Singapore, Thailand, Indonesia, Hong Kong and the Philippines its core markets.
  • Also in 1999, DBS bought Hong Kong's Kwong On Bank from several shareholders that included Japan's Fuji Bank, for SGD $879-million.  Kwong On had 32 branches in Hong Kong.
  • In 2000, DBS bought out the 15% stake in PT Bank DBS Buana from joint-venture partner PT Bank Buana. DBS had several years earlier already acquired 85% of PT Mitsubishi Buana Bank from Japan’s Mitsubishi Bank.  PT Bank DBS Buana was renamed PT Bank DBS Indonesia.
  • In 2001, DBS acquired 59.5% of Singapore stockbroker Vickers Ballas Holdings for SGD $444-million.
  • In 2001, DBS acquired 87.3% of Hong Kong's Dao Heng Bank (as well as Dao Heng’s local subsidiary Oversea Trust Bank) for HKD $41.9-billion (USD $5.40-billion) from its Malaysian parent Guoco Group and from the public shareholders. Dao Heng operated 70 branches and 80 ATMs.  Initially known as DBS Dao Heng Bank, the Hong Kong operations were re-branded as DBS Bank (Hong Kong) subsequently.
  • In 2001, DBS sold its tiny DBS Philippines (chiefy the former Bank of Southeast Asia) to the Bank of The Philippine Islands (BPI) for SGD $55-million (PHP 1.6-billion) in cash. DBS had held 21% of the BPI since 1999.
  • In 2001, DBS made a hostile offer for Singapore rival Overseas Union Bank for SGD $9.44-billion. However, United Overseas Bank subsequently won Overseas Union Bank with a higher, SGD $10.2-billion and DBS withdrew its offer.
  • In 2002, DBS acquired the remaining 12.7% of DBS Dao Heng Bank for HKD $904-million (SGD $211-million).  Following the purchase, DBS Dao Heng became a wholly-owned subsidiary of DBS.
  • In 2004, DBS Thai Danu Bank agreed to a three-way merger with the Industrial Finance Corp. of Thailand, and the much larger Thai Military Bank, creating the 6th largest bank in Thailand with 426 branches and 953 ATMs.  Prior to the merger, DBS Thai Danu had 62 branches in Thailand. Following the merger, DBS would hold 16.1% of the enlarged Thai Military Bank.
  • In 2007, another banking crisis in Thailand necessitated further re-capitalization of the Thai Military Bank, which private investors, including DBS, refused to subscribe to, due to poor governance at the Thai bank and hostility of the Thai government towards Singaporean companies.  As a result, DBS’ stake in Thai Military Bank was diluted to 7.2% from 16.1%.
  • In 2008, DBS received TWD 44.5-billion (USD $1.4-billion) in subsidy from the Taiwan government to take over the operations of failed Bowa Commercial Bank. Bowa Commercial Bank operated 42 branches in Taiwan.
  • In April 2012, Singapore state-owned Temasek and DBS reached an agreement under which Temasek would transfer its 67.4% stake in Indonesia’s PT Bank Danamon to DBS in return for a 10.9% stake in DBS. Temasek already owned a 29.5% stake in DBS before the proposed transaction.  DBS also offered to buy out the 32.6% minority share holdings of Bank Danamon, which valued the entire bank at IDR 66.4-trillion (SGD $9.1-billion, USD $7.2-billion).  PT Bank Danamon operated about 3,000 branches in Indonesia.  However, the deal died in 2013 following failure to gain approval from the Indonesian government.
  • In October 2012, DBS sold a 10.4% stake of the 20.3% interest it held in the Bank of The Philippine Islands (BPI) for SGD $757-million (PHP 25.6-billion).
  • In July 2013, following over a year of inaction from the Indonesian central bank to grant approval on the sale of PT Bank Danamon by Temasek to DBS, the latter announced that the deal had officially died.  Indonesia was averse to allowing competitive and powerful foreign banks to gain significant market share in the backward domestic banking system. The news dealt a major blow to DBS’s long-term strategy to make Indonesia one of its core markets. Without gaining Bank Danamon, DBS' operations in Indonesia numbered only 39 branches from its DBS Bank Buana subsidiary.
  • In November 2013, DBS sold its remaining 9.9% stake in BPI for SGD $850-million (USD $681-million, PHP 29.6-billion). With the sale, DBS abandoned an earlier plan to make the Philippines a core market.
  • In March 2014, DBS bought Société Générale’s Asian private banking business for USD $220-million.  The business purchased had USD $12.6-billion of assets under management.
  • In October 2016, DBS bought Australian bank ANZ's small retail and wealth management businesses in Singapore, Hong Kong, China, Taiwan and Indonesia for SGD $110-million over book value. The purchase would add SGD $17-billion of deposits, SGD $11-billion of loans and SGD $23-billion of assets under management to DBS.

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