BUSINESS
09/12/2011 08:14 am ET Updated Nov 12, 2011

Goldman Sachs, Morgan Stanley Look To Expand Reach In Indonesia

JAKARTA (Janeman Latul and Andjarsari Paramaditha) - 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 deal 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.

The move marks a big leap for Goldman, which does not have an underwriting or broking license in Indonesia. Its rival Morgan Stanley secured an underwriting license 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.

Goldman has completed due diligence for Tiga Pilar and both parties are now negotiating on the deal's structure as well as valuation, said one of the sources, who all declined to be identified because the talks were not public.

"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 on the deals.

The banks' plans in Indonesia, which has seen its stock market <.JKSE> hit records this year on surging foreign investment, follow moves by Nomura Holdings <8604.T> and Citigroup to ramp up their equity research teams in Jakarta this year.

The IDX composite index has jumped nearly 8 percent so far this year, topping the list of gainers in Southeast Asia.

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 50 billion rupiah ($6 million) in license costs and required brokerage capital.

Tiga Pilar is a small brokerage firm partly owned by the family of Tan Pia Sioe, who also controls consumer firm Tiga Pilar Sejatera .

Its 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.

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.

Morgan currently has an underwriting license in Indonesia but not a brokerage license, while Goldman does not have either license, said a spokesman for Indonesia's capital markets regulator Bapepam-LK. ($1 = 8570 Rupiah)

(Additional reporting by Saeed Azhar in SINGAPORE; Editing by Neil Chatterjee and Anshuman Daga)

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