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Goldman
Sachs and Morgan Stanley are each in talks to buy an Indonesian brokerage firm
to expand their reach into the booming capital market of Southeast Asia’s
biggest economy, sources said.
Goldman is
in talks to buy Tiga Pilar Sekuritas and expects to complete the acquisition
before the end of 2011 as it aims to start a local brokerage operation next
year, two sources with direct knowledge of the deal told Reuters on Monday.
Goldman
does not have an underwriting or broking license in Indonesia, while Morgan
Stanley secured an underwriting licence in 2008, but is seeking a bigger
presence through a full-fledged broker license.
Both banks
plan to add research analysts as well as sales and trading staff to the
brokerages next year, while Goldman could also add investment bankers, as they
seek to win fees from equity offerings and debt deals, the sources said.
“I think
this signals a positive view on our capital market ... It has really become an
important destination for global investment banks,” said Winston Sual, who
manages nearly $1 billion in funds at Panin Sekuritas in Jakarta.
“This will
give more competition for fees among global bankers like JPMorgan and Credit
Suisse.”
The banks’
plans in Indonesia, which has seen its stock market hit records this year on
surging foreign investment, follow moves by Nomura Holdings and Citigroup to
ramp up equity research teams in Jakarta this year to challenge leaders Credit
Suisse and Deutsche Bank.
Investment
interest in the G20 member is set to rise again next year, when Indonesia hopes
to get an upgrade by Fitch Ratings to an investment grade sovereign rating that
will put it alongside top emerging BRIC nations such as Brazil.
Goldman has
completed due diligence for Tiga Pilar and both parties are now negotiating the
deal structure and valuation, said one of the sources, who all declined to be
identified.
“Goldman
has already asked Tiga Pilar to start looking for prospective staff and bankers
as a precondition before they complete the deal,” said the source. No financial
details were immediately available.
Officials
at Tiga Pilar and Goldman declined to comment.
The Tiga
Pilar deal size is likely to be small as Goldman is only seeking to buy the
operating licenses that the deal will provide. It will need to at least inject
the Rp 50 billion ($6 million) in license costs and required brokerage capital.
Tiga Pilar,
partly owned by the family of Tan Pia Sioe, traded Rp 445 billion by stock
value in the first six months of this year, ranking it 102 out of 117 active
brokerages, according to stock exchange data.
The IDX
composite index has jumped over 5 percent so far this year, topping the list of
gainers in Southeast Asia.
Goldman’s
rival Morgan Stanley has also identified a target brokerage firm to acquire and
hopes to conduct due diligence this year in order to start operations next
year, said three other sources with direct knowledge of this deal.
“Talks are
ongoing. It is still early to mid-phase. Morgan Stanley is talking to people,”
said one of the sources. Sources declined to give the name of the target
brokerage and no financial details were available.
A Morgan
Stanley spokesman declined to comment. The talks are aimed at either buying a
brokerage to get their seat on the stock exchange or to buy a seat from an
existing brokerage, one of the sources said.
A full
broking license would allow the firm to cover the secondary side of sales and
trading as well as research, the source added.
Citigroup
bought Indonesian brokerage Republik last year and this year added bankers and
analysts, including veteran analyst Ferry Wong from Macquarie as its new head
of research.
Citi was
not in the top five for underwriting Indonesian equity deals last year but this
year has surged up the league table to rank second among global banks, behind
Deutsche.
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