Bumi Plc, founded by Nathaniel Rothschild and the Bakrie family in 2010, is investigating the role of advisers in assessing the accounts of the two Indonesian coal producers at the heart of the $3 billion deal.
Bumi is investigating why the so-called due diligence failed to reveal “issues” that have since become the subject of a four-month probe by law firm Macfarlanes LLP into alleged financial irregularities, the company said yesterday.
The board’s scrutiny of the role of advisers in creating Bumi adds to a growing list of investigations surrounding the venture. The U.K. Takeover Panel said last month it wants to know why it wasn’t made aware of an existing relationship between the Bakries and Rosan Roeslani, president director of one of the assets controlled by Bumi, at the time of the deal.
Rothschild’s Vallar Advisers LP undertook due diligence on the transaction to acquire stakes in the Bakries’ PT Bumi Resources and PT Berau Coal Energy, according to the Bakrie Group. Rothschild, 41, said yesterday it was the board of Vallar Plc, the precursor to Bumi, that decided on the acquisitions.
Bankers at JPMorgan Chase & Co. advised Rothschild’s Vallar on the transaction while Credit Suisse Group AG worked for the Bakrie Group on the deal. Spokeswomen for JPMorgan and Credit Suisse in London declined to comment.
Prior to the completion of the Bumi transaction, “the identification and assessment of acquisition opportunities, including due diligence, were outsourced to Vallar Advisers, an entity led by Mr Rothschild,” Bumi said yesterday.
London-listed Bumi also said it may seek to recover missing funds identified in the Macfarlanes probe, without specifying a figure. Rothschild said the report assessed the possible misappropriation of as much as $1 billion.
“The company has been taking, and continues to take, significant actions including engagement with the Indonesian authorities, meeting with the U.K. Serious Fraud Office, and investigating all recourse options available to it,” Bumi said. It was unable to reveal details of the allegations probed by Macfarlanes “due to exposure of unacceptable legal risks,” Bumi said.
The law firm’s investigation reached “important” conclusions and the Bumi board will pursue claims wherever appropriate and will continue to work with regulators in the U.K. and Indonesia, Julian Horn-Smith, Bumi’s senior independent director, said in a statement. The board believes a large part or all of the documents that underpinned the probe were obtained illegally by e-mail hacking.
Bumi Chairman “Samin Tan knew about financial irregularities involving the Bumi Plc group before he joined the board, yet in his role as chairman did nothing about it,” Rothschild’s NR Investments Ltd. said yesterday. “This calls into question compliance with his legal and fiduciary duties as a U.K. Plc director.” Tan declined to comment today.
The stock has slumped 62 percent in the past 12 months. It gained 4 percent to close at 337.4 pence in London trading today, the highest in almost five months and giving the company a market value of 813 million pounds ($1.2 billion).
Rothschild was the “architect and prime beneficiary of this fiasco,” the Bakries said yesterday, referring to the creation of Bumi in November 2010. The family repeated a demand that Rothschild return a bonus of 16 million Bumi shares that he and fellow founders received as a success fee for the deal.
The creation of Bumi brought together Rothschild, scion of a centuries-old British banking dynasty, and the Bakries, a family-owned palm oil-to-property empire started in Sumatra in 1942. Board infighting and probes in London and Indonesia have resulted in co-founders Rothschild and Indra Bakrie quitting as directors and making separate offers to unwind the transaction.
Rothschild, who has proposed a new board for Bumi in a bid to regain control, criticized the venture’s handling of the Macfarlanes probe, saying it appeared more focused on “settling scores” than seeking to recoup as much as $1 billion of unaccounted funds.
Rothschild’s NR Investments said yesterday that as soon as he became aware of alleged financial irregularities at Bumi in November 2011 he “made the board and the investing public aware of his concerns.” Rothschild has also expressed regret at going into business with the Bakries.
The Takeover Panel ruled last month that the Bakrie Group and Roeslani’s 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, it said.
Rothschild’s Vallar Advisers failed to ensure “that adequate disclosures were made to the Takeover Panel regarding the overt commercial relationship between the Bakries and Rosan Roeslani,” the Bakries said, adding that they relied on his advice “at his insistence.”
“Had we known we would be viewed as concerted, we would have sought a whitewash arrangement which would have provided appropriate voting rights, or not participated in the Bumi transaction at all,” they said.
At the time of the acquisition of the Indonesian coal assets, Vallar Plc wasn’t made aware of any parties acting in concert, NR Investments said last month.
Rothschild said yesterday that the assertion by Bumi he may be responsible for failing to declare the links between the Bakries and Roeslani is “the height of absurdity.”