Trend on Merger Assessment Handled by KPPU in 2018.

Monday, January 14, 2019

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Mergers and acquisitions (M&A) are widespread in Indonesia back in 2018. Various reports in media said the amount of merger and acquisition transactions in Indonesia exceeds IDR 150 trillion. Various transactions that occurred showed increasing consolidation plans in the banking sector. Especially with the plans for interbank acquisitions conducted by several top banks and foreign banks in annexing small banks in Indonesia.

In KPPU, the Commission itself received 74 notifications of merger and acquisition transactions in 2018. Most of these notifications were share acquisition transactions (97.3%). The rest is a merger transaction (business entity merger). There is no consolidation submitted to the Commission this year. Most of the notified transactions are transactions carried out between domestic companies (67.70%). The rest is carried out by foreign companies (18.45%) and foreign companies that take over domestic companies (13.85%). Three countries, namely Japan, Singapore, and United States are the countries that have the most reported transactions in mergers and acquisitions in Indonesia during 2018.

Most of notified merger and acquisition occur in the manufacturing industry (35.4%). The rest was from energy sector (17%) and property (14%). The value of notified transactions filled to the Commission last year exceeding IDR 1,000 trillion, including mega transactions such as PT Inalum’s acquisition of PT Freeport Indonesia, Monsanto’s acquisition by Kwa Investment Co. (Bayer Group), acquisition of PT Bank Danamon Tbk by MUFG Bank Ltd, and acquisition of TMF Orange Holding BV by Saphire Bidco BV.

To date, the Commission has completed its analysis on 41 notifications, with 31 of them has been resolved through the assessment process. While the rest is not required for an assessment, since it does not meet the stipulated notification threshold. Based on the data, there were 11.54% of the filing did not required an assessment process. This shows that the level of knowledge of the business actor on the substance of notification has been quite satisfying.

In terms of law enforcement, the Commission decided 7 (seven) cases of violation of Article 29 relating to notices of mergers and acquisitions that were not delivered at the stipulated period. Some of them are the acquisition of PT Telekomunikasi Indonesia Professional on PT Iforte Solusi Infotek (administrative fines of IDR 1.1 billion); acquisition of PT Darma Henwa Tbk on PT Cipta Multi Prima (administrative fines of IDR 3.75 billion); acquisition of PT Japfa Comfeed Indonesia on PT Multi Makanan Permai (administrative fines of IDR 3.75 billion); and acquisition of PT Nippon Indosari Corpindo, Tbk. on PT Prima Top Boga (administrative fines of IDR 2.8 billion).

Apart from the various facts above, the Commission observed that M&A transactions experiencing an increasing trend, especially with increasing foreign investment and domestic consolidation in the financial sector in Indonesia (through acquisitions of various financial services companies), and consolidation in the e-commerce sector by various technology and application companies.

In 2019, the Commission will prioritize its monitoring on various consolidations in the sector, as well as increase the portion of its law enforcement on merger and acquisition transactions which has not been submitted to the Commission, and impose changes in regulations on notification to accelerate the process of evaluating mergers and acquisitions at KPPU.