News Critique

1. The sources which published the news item.

(a) Saeed Azhar , HSBC, Bank of China, MayBank race for BII stake, Reuters,

http://www.reuters.com/article/businessNews/idUSSIN20351120080312?feedType=RSS&feedName=businessNews&sp=true, March 12, 2008

(b) Reuters, MayBank Shares Dive After Pricy BII Purchase, CNBC,

http://www.cnbc.com/id/23820932/, March 27, 2008

(c) Kathy Fong, MayBank doesn’t need to raise funds, The Star, http://biz.thestar.com.my/news/story.asp?file=/2008/3/29/business/20791050&sec=business, March 29, 2008

2. A brief summary of the event.

The reason this deal came about was because Temasek Holdings (the Singapore Government’s investment arm that owns and manages its direct investments, both locally and overseas) had to divest its stake in one of the two Indonesian Banks it owns. This was to comply with a new ruling from �The Central Bank of Republic of Indonesia’. Although Temasek had until the end of 2010 to comply with Indonesia's new policy on bank ownership, it decided to sell its 42% stake in Indonesia’s sixth-biggest lender, Bank Internasional Indonesia (BII) which was valued at more than USD$800 million.

HSBC, Europe's biggest bank, Bank of China and Malaysia's biggest lender, Malayan Banking Bhd (MBB) emerged as the final bidders but on 26th March 2008 it was unveiled that MBB had won the race to buy the majority stake in BII. MBB offered USD$1.5 billion for a 56% stake in BII (42% from Temasek and 14% from Korea’s Kookmin Bank) while offering USD$1.2 billion for the rest of BII.

3. How does a news item illustrate the topic assigned for your presentation?

The topic is Acquisition and restructuring strategies or Mergers and Acquisitions (M&As). In a nutshell M&As can be defined as one company acquiring another or two or more companies merging to form only one entity. In this day and age, with the competition in the global economy heating up and regulatory constraints relaxing, more and more companies are resorting to M&As to (1) increase market power, (2) overcome entry barriers, (3) boost speed to market, (4) boost diversification, (5) create synergy and of course (6) amplify economies of scale. The various news items presented shows that these 6 reasons are behind the raison d'Ð"Єtre behind MBB’s acquisition of BII.

The selected media reports demonstrates that in order to beef up its regional footprint in South-East Asia, the Malaysian lender paid a hefty 23% premium for BII to chase the coveted synergistic values mentioned above. It gives us readers a good feel of how competition in the banking industry has heightened, forcing this once prudent local lender to embark on this gigantic expansion by venturing abroad in its quest to continue being relevant to its core customers (albeit mostly its corporate ones) despite the difficulties currently surrounding the banking industry with the emergence of the US sub-prime issue which is tipping the Western nations into a feared recession.

4. What can be learnt from the event? How does this event contribute to a better understanding of the topic assigned for your presentation?

This event contributed in widening my perceptive on the complexities and magnitude of an acquisition whilst understanding further the value of Strategic Management in terms of the competitiveness and globalisation of our world today. The topic also broadened my knowledge on the banking sector both locally and internationally.

I now understand the importance of a proper due diligence especially when such a large sum of money is involved. The integration difficulties in terms of culture,

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