Bumi Proposes Separation From Indonesia’s Bakrie Family

November 8, 2013 Leave a comment

Bumi Proposes Separation From Indonesia’s Bakrie Family

BEN OTTO

Updated Nov. 7, 2013 9:51 p.m. ET

JAKARTA—London-listed coal company Bumi BUMI.LN +4.79% PLC has proposed the company’s separation from Indonesia’s influential Bakrie family after months of wait, setting a shareholder vote for Dec. 4. The company said in a press release dated Thursday that shareholders would vote to sell a 29.2% stake in one of Indonesia’s largest coal companies, the Bakries’ flagship entity PT Bumi Resources, BUMI.JK +1.18% for $501 million, thus ending a relationship with the Bakries that went sour over issues of corporate governance.The company also said it is initiating arbitration proceedings against Rosan Roeslani, former director of Bumi PLC’s PT Berau Coal, for missing a deadline in September to make an initial payment of $30 million in money he owes the company. Mr. Roeslani earlier this year agreed to repay Bumi $173 million in cash and assets for money that disappeared during his time at the Indonesian-listed subsidiary.

Mr. Roeslani declined to comment when contacted Friday. He’s among three Indonesian businessmen who last month signed an agreement to buy a combined 70% stake in Italian Serie A team, FC Internazionale Milano SpA. From its majority shareholder Internazionale Holding S.r.l,. wholly controlled by Massimo Moratti for undisclosed amount.

Under the terms of the separation, an entity controlled by Samin Tan, Bumi PLC’s outgoing chairman, would pay $223 million to acquire the Bakries’ remaining minority stake in Bumi PLC, leaving Mr. Tan in control of almost half of the London company.

“It’s very positive that the unwinding process that we proposed 12 months ago is moving forward. Shareholder value can be further restored once the separation is completed, something we welcome that has been long overdue,” the Bakrie Group’s spokesman Chris Fong said in a comment sent to The Wall Street Journal.

Bumi PLC was shepherded into existence back in June 2011 by European financier Nat Rothschild, the 40-year-old scion of a European banking dynasty who is known for his senior political and business connections.

Mr. Rothschild’s involvement in Bumi started out with the creation of a London-listed investment firm named Vallar PLC, which raised £707 million in a listing on the London Stock Exchange LSE.LN -1.54% in July 2010. Vallar used the funds to acquire 25% of Bumi Resources and 75% of Berau Coal Energy BRAU.JK +0.55% in spring 2011 for a combined $3 billion. Vallar became Bumi PLC in April 2011, after a share-swap operation.

The Bakrie Group is one of Indonesia’s most powerful conglomerates. It has interests in coal, palm oil, property and media. The Bakrie family’s eldest son, Aburizal Bakrie, is a front-runner to become Indonesia’s president in 2014.

The reason for the unlikely marriage was to give international investors an avenue to earn money from China’s surging demand for coal while giving the Bakrie Group a better avenue to raise money and improve its global standing. The venture has struggled for most of its life, with Bakrie Group debt problems, accusations of low governance standards and the sliding price of coal combining to hurt Bumi’s share price. Unable to reconcile their difference, the Bakrie family in October 2012 proposed a divorce, which will leave Bumi with cash and majority ownership in Berau, Indonesia’s fifth largest coal producer in term of production.

As part of the separation, Bumi is also proposing to change its name to Asia Resource Minerals PLC.

“The Separation is financially attractive and value accretive. Approving the Separation will crystallize a 116% premium above market price for our stake in Bumi Resources at a price of $501m. The transaction will allow us to move forward to create a focused coal producer with a clear strategy for the further restoration of shareholder value,” Bumi’s Chief Executive Nick von Schirnding said.

The company said it has appointed Paul Fenby on Oct 1 as chief financial officer and Keith Downham on Sept 30 as chief mining officer. Both are based in Jakarta.

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