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Mitsubishi UFJ (MTU) to Own 19.9% Stake in Bank Danamon

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In an effort to expand its footprint in Southeast Asia, Japanese banking behemoth Mitsubishi UFJ Financial Group, Inc.’s core banking unit — The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”) — has entered into share-purchase agreements with Asia Financial (Indonesia) Pte. Ltd. (“AFI”) and other affiliated entities (the “Sellers”) for acquiring their shareholding interests in Indonesian bank, PT Bank Danamon Indonesia (“Danamon”).

The transaction awaits certain regulatory approvals. Notably, AFI is a wholly owned subsidiary of Fullerton Financial Holdings Pte. Ltd. The Sellers owns 73.8% shareholding interests in Danamon at present.

Terms of the Agreement

Per the terms, an initial 19.9% stake will be acquired by Mitsubishi UFJ in Danamon for a total amount of $1.17 billion (IDR 15.875 trillion).

Further, the bank plans to get regulatory and other relevant approvals for acquisition of an additional 20.1% stake in Danamon, totaling 40%. Notably, on receiving applicable approvals, Mitsubishi UFJ expects to reach the goal between the second and third quarters of 2018.

Additionally, once Mitsubishi UFJ obtains regulatory approvals for increasing its stake in Danamon to 40%, it intends to seek approvals for further stake beyond 40%. Therefore, with all necessary approvals, the bank’s final stake in Danamon is likely to be nearly 73.8%.

Takayoshi Futae, MUFG’s CEO for Asia & Oceania region said, “As one of the leading banks in Asia & Oceania, we have long recognised Indonesia’s role as one of the key drivers of the region’s development and have sought to establish a stronger presence in the country.”

The weakness in the Japanese loan market, along with compressed margins, has triggered Mitsubishi UFJ’s interest in other Asian markets. Notably, in recent years, MUFG has stretched its foothold in Southeast Asia, holding stakes in Vietnam's Vientinbank, Thailand's Bank of Ayudhya and Security Bank Corp of the Philippines.

Currently, Mitsubishi UFJ carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company rallied 12.6% over the past six months on the NYSE compared with 11.9% growth recorded by the industry.

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