Sluggish economy, merger and acquisition massive

JAKARTA. Many companies conducted business consolidations, either in the form of merger or acquisition, amid the sluggish economy. Not surprisingly, the transactions value of merger and acquisition (M&A) in this year has surpassed the record of M&A value as much as US$ 10 billion in 2003.

The massive mergers and acquisitions have occurred since the semester I-2016. According to the estimation of Singapore based company financial consultant Duff & Phelps, there were 71 mergers and acquisitions in Indonesia with a total transaction value of US$ 1.9 billion. This figure has exceeded the total M&A value in the last year that amounted to US$ 1.57 billion.

The M&A transactions become more massive with a jumbo value in the semester II-2016. The newest was the acquisition of Star Energy consortium over several geothermal power plants with a total capacity of 740 Megawatt owned by Chevron Group in Indonesia and the Philippines.

The acquisition agreement has been signed on Thursday (22/12). According to information received by KONTAN, the total value of the transaction amounts to US$ 2,5 billion. The value of assets, which were acquired by Star Energy in Indonesia, amounted to U$ 1.98 billion.

Previously, Medco Energy Group had also booked acquisition with a jumbo value. This company spent US$ 2.6 billion to acquire 82.2% shares of PT Newmont Nusa Tenggara. Still in mining and energy fields, Electricity Generating Authority of Thailand (EGAT) acquired 12% shares of coal producer PT Adaro Indonesia with a transaction value of US$ 325 million. Meanwhile, Highland Strategic Holding from Singapore acquired as much as 61.79% shares of PT Toba Bara Sejahtra Tbk with a total transaction value of Rp 1.07 trillion.

In another sector, Government of Singapore Investment Corporation (GIC) invested US$ 370 million to the management of XXI cinema network PT Nusantara Sejahtera Raya. Previously, at the end of November 2016, Apro Financial Co Ltd has settled a worth of Rp 450 billion of the acquisition of 40% Bank Andara shares.

Apro is also processing the acquisition of 77.38% of Bank Dinar shares with the total value of Rp 691 billion. Meanwhile, Fairfax Asia Limited acquired as much as US$ 225 million of 80% PT Asuransi Multi Graha Guna shares.

In property business, Ciputra Group conducted merger with involving Rp 44 trillion assets. Almost concurrently, PT Modernland Realty Tbk and PT Astra Land Indonesia have agreed to build partnership in forming property business.

According to KONTAN’s research, by the end of this year the total value of merger and acquisition will amount to more than US$ 11 billion. In terms of M&A frequency, retail and consumer good sectors will be dominating the M&A transactions, while energy and mining sectors are dominating in terms of transaction value.

General Chairman of Association of Indonesian Emplotyers (Apindo) Hariyadi Sukamdani estimates, that the massive expansions to retail business in domestic market are normal. For an example, GIC has injected US$ 385.19 million funds to TransRetail CT Corp, which oversees Carrefour and Transmart.

Vice General Chairman of Indonesian Chamber of Commerce and Industry (Kadin) Shinta Widjaja Kamdani said, the merger and acquisition become more massive due to the sluggish economy. It has been a general formula that the M&A will be massive during the slow economy. Usually, M&A aim at improving corporate performance.

(Muhammad Farid/Translator)