Rothschild Raises $270 Million for Bumi Severance Proposal

Financier Nathaniel Rothschild
Financier Nathaniel Rothschild said, “The independent board members need to evaluate our proposal which currently appears to be the only workable solution.” Source: Finsbury Ltd. via Bloomberg

Nathaniel Rothschild, who quit the board of London-listed Bumi Plc last month, has raised $270 million for a proposal to the coal producer that would see it sever ties with shareholders including Indonesia’s Bakrie family, Rosan Roeslani and Chairman Samin Tan.

Rothschild’s NR Investments has committed funds to the proposal along with other investors, he said in an e-mailed statement sent to Bloomberg News. The Bakries, who made a rival $1.2 billion approach for the coal assets of Bumi last month, would be willing to study the plan, spokesman Chris Fong said.

“The independent board members need to evaluate our proposal which currently appears to be the only workable solution,” Rothschild said in his statement yesterday.

The proposal from the 41-year-old, whose ancestor helped bankroll Britain’s war against Napoleonic France, was sent to Bumi independent directors last month as he stepped up a battle for control of the group he set up with the Bakries in 2010. Rothschild resigned as a director amid a feud with the Bakries and Tan, saying he’d lost confidence in the board.

“They are open to anything that is reasonable and works for everybody,” Bakrie spokesman Fong said by phone from Sydney yesterday. “This is just an unfortunate situation what’s happened.”

‘Difficult for Investors’

Bumi investors Schroders Plc, Standard Life Investments, Artemis Investment Management LLP and Abu Dhabi Investment Co. have agreed to support Rothschild’s proposal, a person with knowledge of the plan said. The proposal may include a rights offer, the person said, asking not to be identified as the negotiations are confidential.

“It’s difficult for investors to take a view because we don’t have any details of the proposal,” Richard Knights, an analyst at Liberum Capital Ltd. in London, said by phone. “The key risk is that the company may be left without any powerful, aligned interests in Indonesia and that could be a scary proposition.”

Robert Friedland, the billionaire founder of mining company Ivanplats Ltd., has agreed to invest $50 million in the venture with Rothschild, the person said. Friedland declined to comment.

Rothschild, the scion of a centuries-old banking dynasty, also called for Tan to step down. “A new board will restore confidence,” he said in his statement. Tan said last week he supports the Bakries’ offer, adding that it equates to between 5 pounds and 6 pounds a share.

‘Bring Price Down’

“If there’s a deal which can bring the share price to 5 to 6 pounds, why don’t we support it?” he said in a Nov. 15 interview. “If there is other ways and means to achieve the same or even better, rest assured I will go for it. If Nat’s proposal can result in the same or better, I will undoubtedly support it.”

Bumi Resources shares declined 1.7 percent to 590 rupiah at the midday break in Jakarta trading and were headed for their lowest close since February 2009. Shares of Borneo Lumbung Energi & Metal, which together with the Bakrie group controls 47.6 percent of Bumi Plc, fell 1.6 percent to 610 rupiah.

“The questions is, can he offer a better deal than the Bakries?” Wilianto Ie, head of Indonesia equities research at Nomura Holdings Inc., said by telephone from Jakarta referring to Rothschild’s offer. Considering Rothschild has “only raised $270 million for now, will he do it with leverage? At the end of the day, he has to offer a better deal than the Bakries.”

Morgan Stanley

Rothschild, who is being advised by Morgan Stanley, has also secured support from Hashim Djojohadikusumo, son of Sumitro, one of the architects of Indonesia’s economic programs in the late 1960s, the person said. His proposal is being studied by Bumi’s advisers and independent directors, according to a Nov. 5 statement.

Officials for Schroders, Standard Life and Artemis and Bumi declined to comment. Officials at Abu Dhabi Investment couldn’t be reached for comment.

Tan said in the interview he hadn’t seen Rothschild’s proposal as it had only been given to independent directors of Bumi. PT Borneo Lumbung Energi and Metal and the Bakrie Group may agree this week to end their joint venture that holds 47.6 percent of the shares in Bumi, freeing Bakrie to trade its stake and exit the company, Tan said in the interview.

Coal Producers

The $3 billion deal between Rothschild and the Bakries two years ago listed stakes in two Indonesian coal producers in London. The boardroom infighting and investigations in London and Indonesia into potential financial irregularities have prompted moves to unwind the investment. The Bakries have offered to acquire the 29 percent stake in PT Bumi Resources and 85 percent of PT Berau Coal Energy held by Bumi Plc.

The Bakrie Group has offered to exchange a 23.8 percent stake in Bumi Plc for 10.3 percent of Jakarta-based Bumi Resources. The group also made a conditional proposal to buy back the remaining 18.9 percent in Bumi Resources in cash by Christmas. In addition, it plans to offer $947 million for Bumi Plc’s 84.7 percent stake in Berau Coal Energy.

Roeslani is president director of Berau Coal Energy and owns about 13 percent of London-listed Bumi Plc through Recapital. Rothschild owns about 12 percent of the company’s voting stock. Bumi declined 2.6 percent to close at 259.8 pence in London yesterday.

Bumi Resources, Indonesia’s top producer of power-station coal, said a court on Nov. 9 approved an independent investigation into its accounts dating back to 2010. Bumi Resources is part-owned by the Bakrie family.

The probe was prompted by the company’s audit committee “in view of the public notifications by a shareholder, Bumi Plc, and various reports, both in international and local media,” Jakarta-based Bumi Resources said that day.

The London-listed company announced Sept. 24 an inquiry into “potential financial and other irregularities” at its Indonesian operations, Bumi Resources and Berau Coal Energy.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE