Korea Development Bank (KDB) is finalizing a deal to acquire multi-finance company PT TIFA Finance, as it looks to establish a foothold in the Indonesian market and diversify outside South Korea’s crowded financial services sector.
The bank signed a stock purchase agreement (SPA) to acquire an 80% stake for the management rights last year and has been seeking approval from the Financial Services Authority of Indonesia (OJK) for a takeover, according to industry watchers. KDB will pay for the remaining stake once the OJK approves the agreement and will be able to acquire PT TIFA Finance in about a year if the buyout deal is completed in the third quarter.
KDB opened an office in Jakarta in February 2019 with plans to enter Southeast Asian markets. Banks in South Korea face intense competition and are struggling to generate positive cashflows amid low interest rates.
The Jakarta office cannot be used to directly operate a financial business, but will help KDB locate investment banking deals through a local network and communicate with the OJK. KDB also operates offices in Singapore, Thailand, Vietnam, Philippines, Myanmar and other Southeast Asian countries.
State-run KDB attempted to enter the Indonesian banking industry by acquiring a local company, but turned to the installment loan industry after seeing signs of overheating in the market. Instead, KDB targeted TIFA Finance, which offers a wide range of financial services, including leasing and consumer financing.
According to its annual report, PT TIFA Finance posted sales of 18.4 billion won ($15.2 million) and a net profit of 2.4 billion won ($2 million) in 2019. (Reporting by Hyunwoo Jin)