Rothschild Widens Support for Bumi Deal That Rivals Bakries

Nathaniel Rothschild
Nathaniel Rothschild, chairman and chief executive officer of JNR Ltd. Source: Finsbury Ltd. via Bloomberg

Nathaniel Rothschild, the financier seeking to unwind a $3 billion deal with Indonesia’s Bakrie Group, said investor support for his proposal to Bumi Plc has widened to include the top-five institutional shareholders.

The investors have a “desire to invest new equity capital into the company, in order to remove completely the Bakries and their allies from the Bumi Plc shareholder register,” Rothschild said in an e-mailed statement yesterday. He’s sent a letter to the board of Bumi outlining his proposal which has gained commitments totaling $342.5 million from investors including $75 million of his own funds, the statement shows.

Bumi Plc was founded by Rothschild and the Bakries, a family-owned palm oil-to-property empire, in a 2010 transaction that grouped stakes in two Indonesian coal producers. The deal started to unravel in October last year when Rothschild called for a “radical cleaning up” of PT Bumi Resources, which is 29 percent owned by Bumi Plc.

The ensuing boardroom infighting that has resulted in Rothschild and Indra Bakrie resigning in recent months, as well as investigations in London and Indonesia into possible financial anomalies, have prompted moves by both to unwind the deal.

The Bakrie Group offered to buy all of Bumi Plc’s assets in a $1.2 billion proposal to help resolve “irreconcilable differences” with Rothschild and the other founders, according to a letter containing the Oct. 10 approach.

Clear Evidence

Abu Dhabi Investment Council, Schroders Investment Management Limited, Standard Life Investments, Taube Hodson Stonex LLP, and Artemis Investment Management LLP support Rothschild’s proposal to restructure the group, according to his statement. This brings the total backing to 28 percent of the voting rights of Bumi, according to Rothschild.

Their support “is clear evidence that the proposal delivers far superior value for the company and its independent shareholders than does the Bakrie proposal,” Rothschild said. “My understanding is that the thresholds required by the Bakries to see their proposal succeed cannot now be reached.”

The Bakries have offered to acquire all of Bumi’s assets; the 29 percent stake in Bumi Resources and 85 percent of PT Berau Coal Energy.

Their proposal involves the exchange of 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.

Bumi dropped 1.2 percent to close at 272 pence in London yesterday. The stock has slumped 69 percent this year, valuing the company at 655 million pounds ($1.1 billion).

Samin Tan

The initial proposal from 41-year-old Rothschild, whose ancestor helped bankroll Britain’s war against Napoleonic France, was sent to Bumi independent directors in October as he stepped up a battle for control of the group. He has made repeated demands for Chairman Samin Tan and Rosan Roeslani, a director who indirectly controls about 13 percent of Bumi, to resign.

Separately, Bumi Plc Chief Executive Officer Nalin Rathod is expected to resign tomorrow, London’s Telegraph newspaper reported, without saying where it got the information. Rathod is an associate of the Bakries and his departure would follow Indra Bakrie’s resignation last week, the paper said.

Rothschild Backing

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, and billionaire mining investor Robert Friedland, he said yesterday.

Bumi Plc yesterday confirmed the receipt of a letter from Rothschild and said it would “provide further information to shareholders in due course.”

London-listed Bumi announced Sept. 24 an inquiry into “potential financial and other irregularities” at its Indonesian operations, Bumi Resources and PT Berau Coal Energy. London-based law firm Macfarlanes LLP is handling the probe.

The Bakrie Group, an Indonesian family-run empire with investments from palm oil to property, said earlier some documents used to justify a probe into Bumi Plc were stolen or accessed by hacking.

Board Meeting

“Some of these documents appear then to have been ‘doctored’ to give a purposely misleading impression of a number of business transactions at Bumi Resources,” Chris Fong, a spokesman for the Bakrie Group, said in e-mailed comments.

Bumi Plc’s board will discuss the investigation at a Dec. 12 meeting, two people familiar with the matter said, asking not to be identified because the information isn’t public.

“Contrary to earlier reports, there has been no ‘whistle-blower’ from within Bumi Resources, the documents supplied to the independent directors appear to have originated from a fabricated source and packaged to give the impression that they were real, which was not the case,” Fong said.

Lost Confidence

Rothschild quit Bumi Plc’s board in October in a letter to Chairman Tan, saying he had lost confidence in the board’s ability. He said it was a “matter of great regret for me that I was party, with our advisers, to bringing the Bakries to London.”

Rothschild yesterday described the allegations of doctored documents and hacking as a “desperate attempt to divert the inquiry by Samin Tan and the Bakries.”

“If there was any legitimate reason to doubt the authenticity of the material forming the basis of the independent inquiry, then no doubt the substance of those concerns would have been shared with the law firm conducting that inquiry and the inquiry would have ended,” he said in an e-mailed statement.

The dispute pits Rothschild, scion of a centuries-old banking dynasty, against one of Indonesia’s most wealthy and powerful families.

The Bakries said yesterday they plan to submit a report to U.K. police and other regulatory authorities, according to Fong. Indonesian police continue to probe the hacking complaints, he said.

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