A proposal by Nathaniel Rothschild, scion of a centuries-old banking dynasty, to oust most of the board of the Indonesia coal venture he helped found in London two years ago has support from investor Sofaer Capital Inc.
“There’s no question in my mind the shareholders of Bumi would benefit greatly from Nat’s proposed board,” said Michael Sofaer, chief investment officer at the firm that owns more than 1 percent of Bumi Plc. “Conversely, they can expect nothing but the same if the same board were to stay in-situ. The contrast is so stark that it barely is worth making it,” he said by phone.
Rothschild, 41, wrote in a Jan. 7 letter that the board had failed and CEO Nick von Schirnding and Chairman Samin Tan were among directors who should be removed. That day Bumi Plc acceded to his request for a shareholder meeting to vote on the removal of 12 of 14 directors, replacing them with a board including former Leighton Holdings Ltd. head Wallace King as chairman.
“There is no time to lose to make a change,” said Sofaer, who started his fund in 1983. “It’s so plain for anybody with half a brain, you can see that there’s something wrong here, there’s something deeply, deeply troubling.”
Bumi shares are trading 70 percent below the 2010 initial public offering price of Rothschild’s Vallar Plc, which raised 707 million pounds ($1.1 billion). Bumi stock is down 65 percent in the past year and rose 1.4 percent to 304.2 pence at 12:03 p.m. in London.
Next month’s vote is the culmination of more than a year of boardroom infighting that saw Rothschild and former co-chairman Indra Bakrie quit the group they formed when Vallar acquired stakes in two coal producers in a $3 billion deal in 2010 to create Bumi Plc. Both have proposed unwinding the group, which has been the subject of probes in the U.K. and Indonesia. The U.K. Takeover Panel last month ruled that two shareholders, the Bakrie Group and PT Bukit Mutiara, are “acting in concert.”
A spokesman for Bumi declined to comment.
King was CEO of Sydney-based Leighton for 23 years before retiring at the end of 2010. Rothschild, who holds 14.7 percent of the voting rights in Bumi, proposed mining executive Brock Gill as CEO and himself as an executive director.
He has also nominated Hashim Djojohadikusumo, Roger Davis, Jonathan Djanogly, a U.K. conservative member of parliament and former justice minister, and Richard Gozney.
Gozney is a former British ambassador to Indonesia.
Rothschild has “made a very real and determined effort to put together a serious world-class board and that is what the Bumi shareholders deserve,” Sofaer said. “King is a first-class operator. I can’t imagine that he will preside over a situation like this without making a very real and determined effort to turn things around.”
The changes in personnel would benefit Bumi, the Financial Times cited Richard Buxton, head of U.K. equities at Schroders Plc, as saying this week. Schroder Investment Management Ltd. had a 3.51 percent stake in Bumi as of Oct. 3 last year, according to data compiled by Bloomberg.
The London-based law firm Macfarlanes LLP in September started a probe into potential financial irregularities at some of Bumi’s Indonesian operations. The mining company said last month it had received a near-final version of the report.
Together the Bakries and Bukit Mutiara control 50.3 percent of the voting rights in Bumi Plc and must reduce those rights to less than 30 percent by disposing of shares, the Takeover Panel said in a statement last month.
Bumi last month rejected a five-step plan from Rothschild regarding its coal assets. Rothschild made his proposal after the Bakrie Group in October offered $1.2 billion to buy all of Bumi’s producing assets -- a 29 percent stake in PT Bumi Resources and an 85 percent holding in PT Berau Coal Energy. Morgan Stanley is advising NR Investments.
It’s instead progressing with a $430 million plan that would see it sever ties with the Bakrie family and exit its investment in Bumi Resources. Recent share price movements have made the offer “more attractive” for Bumi Plc holders, the company said in a presentation this week.
“Our near-term strategy is very clear: to effect a separation from Bumi Resources and to maximize value in our operating subsidiary, Berau,” von Schirnding said in a statement. The company is also reviewing the board structure, it said in the presentation on its website.
A spokesman for the Bakrie Group yesterday referred to a Jan. 7 statement that described Rothschild’s proposal as “yet another distraction.”
It “is an unjustified attempt to exert control over the company to the detriment of other shareholders,” the Bakrie Group’s Long Haul Holdings Ltd. said in the statement. “We believe shareholders will see his attempt to reappoint himself and his nominees to the board as a retrograde step.”
“The Bakries need to articulate why proposing one of the world’s best coal mine operators to the chairmanship of this company is a ‘retrograde step,’” Rothschild said in e-mailed comments to Bloomberg. “It is only ‘retograde’ if your objective is to ruin the business.”
Rothschild founded Bumi in 2010 with a vision to create an Indonesian “resources champion” through the combination of holdings in the country’s largest and fifth-biggest coal producer. The Bakries have described him as a “disappointment” and repeatedly demanded he and other founders return 16 million bonus shares received as a success fee for the deal.
“Nat took a risk, is he to blame? He was involved, he sold the story to people, he was convinced and he was wrong,” Sofaer said, adding he’s known Rothschild for 15 years. “He’s worked very hard to turn it around because he understands what his reputation is worth. I’m not so sure that the others on the board have the same understanding about theirs.”