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Bumi Rebuffs Rothschild Plan as U.K. Regulator Starts New Probe

Bumi Plc, the company at the center of a dispute between Nathaniel Rothschild and Indonesia’s Bakrie Group, said a proposal from the financier regarding the fate of the $1.1 billion company’s coal assets was rejected.

The offer from Rothschild’s NR Investments lacks support from major shareholders PT Borneo Lumbung, owner of 23.8 percent, and PT Bukit Mutiara, 9.8 percent, Bumi said yesterday in a statement. A rival plan from the Bakrie Group has only partial backing, Bumi Senior Independent Non-Executive Director Julian Horn-Smith said.

Bumi was founded by Rothschild and the Bakries, a family-owned empire with investments in palm oil to property, in a $3 billion deal in 2010 that grouped stakes in two Indonesian coal producers. Boardroom infighting and financial probes have since prompted moves by both parties to unwind their collaboration, and Rothschild has sought support for a plan to remove the Bakries as shareholders of Bumi.

The board of London-listed Bumi is unanimous in pursuing a separation from the Bakrie Group and PT Bumi Resources, in which the coal company holds a 29 percent stake, and will put this to shareholders “as soon as possible” in 2013, Horn-Smith said.

The U.K. Takeover Panel ruled yesterday that the Bakrie Group and Bukit Mutiara, which together control 50.3 percent of the voting rights in Bumi Plc, are regarded as “acting in concert.” They must reduce those rights to less than 30 percent by disposing of shares, the panel said in a statement.

Starting Probe

The panel is also starting a separate probe into “why it was not previously made aware of the existence of the concert party,” and why a waiver was not sought, the statement shows.

At the time of the acquisition of the Indonesian coal assets, Vallar Plc, the precursor to Bumi that was founded by Rothschild, wasn’t made aware of any parties acting in concert, NR Investment said in an e-mailed statement.

Bukit Mutiara is indirectly controlled by Rosan Roeslani, a Bumi director, the panel ruled, saying its decision had been accepted by the Bakrie Group, Mutiara, Bumi and Rothschild.

Roeslani has resigned from Bumi’s board, the coal producer said in its statement. Following his departure, and that of Ari Hudaya, Rothschild and Indra Bakrie, who represented the founding shareholders, the majority of Bumi’s directors are independent, the company said.

PT Borneo Lumbung Energi & Metal, controlled by Bumi Chairman Samin Tan, said Dec. 18 it rejected a proposal from Rothschild to sell its stake in Bumi and is not in any talks with the financier or his advisers regarding the proposal. It’s seeking to meet with key shareholders for talks on the company.

Recover Investment

Tan’s Borneo acquired a 23.8 percent stake in Bumi Plc in January from the Bakries for $1 billion. At current market prices that stake is now worth about 153 million pounds ($249 million). Borneo expects to recover as much as possible of its investment in Bumi, Alexander Ramlie, president director of Borneo, said Oct. 25.

Borneo Lumbung fell 1.8 percent to 560 rupiah by the close of trading in Jakarta. Bumi, which has slumped 69 percent this year in London, fell 0.7 percent to 268.6 pence.

Rothschild made his proposal after the Bakrie Group in October offered $1.2 billion to buy all of Bumi’s assets -- the stake in Bumi Resources and an 85 percent holding in PT Berau Coal Energy. Bumi said yesterday it has no intention of disposing of Berau Coal.

The Bakries welcomed the Takeover Panel’s findings and said they were caught in an “unjust situation,” where holders of 57 percent of the equity in Bumi Plc were restricted to only 29.9 percent of the votes.

‘Serious Step’

They also took the “serious step” of making a formal complaint to the Takeover Panel on Dec. 14 “in relation to the conduct of Mr. Rothschild with respect to the original reverse takeover.” The family repeated a demand for Rothschild to return the 14 million bonus shares, or 6 percent of the company’s stock, that he was awarded at the time the original deal was struck in 2010.

Rothschild has 14.7 percent of the votes after subscribing to 3.16 percent of the initial public offering of Vallar Plc, the precursor to Bumi, the group said in a statement.

Rothschild, who’s being advised by Morgan Stanley, said in an e-mailed statement he would continue to pursue talks with the Bakrie Group, Borneo Lumbung and Bukit Mutiara to seek “a consensual solution that will be in the interest of all Bumi Plc shareholders.”

By Christmas

The Bakrie Group has offered to swap its 23.8 percent stake in London-listed Bumi for 10.3 percent of Bumi Resources, Bumi Plc said in October. The Bakries proposed to buy back the remaining 18.9 percent in Bumi Resources by Christmas and to make an offer for Bumi Plc’s 84.7 percent stake in Berau Coal within six months.

Rothschild’s five-step proposal includes issuing new shares equal to 25 percent of the current share capital at the prevailing Bumi share price, according to a Dec. 12 statement. That would help fund an offer to purchase the 23.8 percent stake in Bumi held by Borneo Lumbung and a 9.8 percent holding of Bukit Mutiara for the same price. His offer to unwind the Bakrie’s investment is identical to the Bakrie family’s own proposal, according to the statement.

The competing proposals follow infighting that has seen Rothschild, who controls about 12 percent of Bumi Plc voting stock, and Co-Chairman Indra Bakrie resign. Investigators in London and Indonesia are probing possible financial anomalies.

Rothschild has made repeated demands for Tan and Roeslani to resign and said last week that he may seek to remove the board of the coal venture.

Institutions’ Backing

Rothschild has said his proposal has the support of Bumi Plc’s top institutional shareholders, including Abu Dhabi Investment Council, Schroders Investment Management Ltd., Standard Life Investments, Taube Hodson Stonex LLP and Artemis Investment Management LLP.

Bumi announced Sept. 24 an inquiry into “potential financial and other irregularities” at its Indonesian operations. The company has received a near-final version of a report by law firm Macfarlanes LLP, which is handling the probe, it said last week.

Borneo yesterday said Rothschild obtained “certain confidential documents” of the company’s that were then given to Bumi’s non-executive directors and used by Macfarlanes in the investigation. It’s investigating the incident and intends “pursuing remedies and reporting any wrongdoing to relevant authorities, including to the police in the U.K. and Indonesia.

In a separate statement, Bumi confirmed that the allegations that underpinned the Macfarlanes probe were first passed to one of its independent directors by Rothschild.

‘‘Rothschild has told the company that the material was offered to him on an unsolicited basis and that he is not in a position to provide details as to the origin of the material or to speak as to how it was originally obtained,’’ Bumi said.

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