HSBC Buys Bank Ekonomi of Indonesia for $608 Million

HSBC Holdings Plc, Europe's biggestbank by market value, has agreed to buy 88.9% of PT Bank Ekonomi Raharja Tbk (Bank Ekonomi) for $607.5 million in cash.
The acquisition will enhance HSBC's commercial banking in Indonesia and almost double its branch network in the country to over 190 outlets in 24 cities, HSBC said in a filing to the Hong
Kong stock exchange today.
``This acquisition underlines HSBC's stated strategy to invest in fast-growing emerging markets,'' said Sandy Flockhart, chief executive officer of HSBC Holdings Plc's Asia-Pacific unit,
in the statement.
``This increases our presence in Indonesia, putting us in the top three foreign banks in the country.''
HSBC is focusing on expanding in emerging markets after posting about $27 billion of ritedowns in the past year, mainly linked to subprime mortgage losses at its U.S. Household International unit. Even so, the bank has posted smaller markdowns than competitors Merrill Lynch & Co., Citigroup Inc. and UBS AG over the year-old credit crisis.
Bank Ekonomi was established in 1989 and has 2,200 employees in 86 branches with assets of 17.2 trillion rupiah ($1.8 billion). It reported pretax profit of $24 million for the nine months to
Sept. 30. Under the terms of the agreement, HSBC will acquire a 38.84% stake from PT Lumbung Artakencana, 38.60% from PT Alas Pusaka and 11.45% from individual shareholders of Bank Ekonomi. Under Indonesian law, HSBC will be required to make a mandatory offer for remaining shares in the bank.