Bumi Plc, at the center of a dispute over control involving founders Nathaniel Rothschild and the Bakries, said the Indonesian family are sticking to terms of a proposal valued at more than $580 million to exit the group.
“The negotiations have gone well, I’m confident they will come up with the funding,” Nick von Schirnding, chief executive officer of Bumi, told Bloomberg Television yesterday. The Bakries aren’t seeking to renegotiate a proposal that included a cash offer of $278 million for shares in PT Bumi Resources, one of two Indonesian coal investments by London-traded Bumi.
Bumi slumped 69 percent last year as Rothschild and the Bakries intensified a fight over the coal assets, valued at $3 billion when the deal was struck in 2010. Rothschild and former co-chairman Indra Bakrie have since quit the board and made proposals to unwind the venture, now valued at $1.3 billion.
“The direction the current board is taking is a sensible and achievable one,” London-based Barclays Plc analysts David Butler and Ian Rossouw said in a note. “It separates Bumi Plc from any Bakrie influence.”
The Bakries’ October cash offer of 680 rupiah a share for 18.9 percent of Bumi Resources is a 9.7 percent premium to today’s closing price in Jakarta of 620 rupiah.
Bumi yesterday told shareholders to reject Rothschild’s bid to return to the board and oust 12 of the 14 directors at a shareholder vote scheduled for Feb. 21. He has proposed former Leighton Holdings CEO Wallace King as chairman of the group.
“Although we see significant turnaround potential for Bumi Plc, the likelihood of this being achievable hinges on several unpredictable factors, including successfully navigating the Rothschild extraordinary general meeting,” Patrick Jones, an analyst at Nomura International Plc, wrote in a report. The ability of the Bakries to obtain financing is also an unknown factor, he said.
The Bakrie Group has never failed in any M&A transaction due to the non-availability of funds, it said in an e-mailed statement yesterday. Bumi dropped 1.7 percent to close at 339 pence in London trading.
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. Waning coal prices, board infighting and probes in London and Indonesia including an investigation by Macfarlanes LLP into alleged financial irregularities have weighed on the stock.
“What we need is independent management and an independent board to run this business going forward,” Rothschild, 41, said yesterday in an interview with Bloomberg Television from Klosters, Switzerland. Rothschild, advised by JPMorgan Chase & Co., raised 707 million pounds ($1.1 billion) in the 2010 initial public offering of Vallar Plc, which later became Bumi Plc.
Bumi said it is progressing with negotiations to sever ties with the Bakries, who in addition to the cash component propose exchanging their 23.8 percent of Bumi for 10 percent of Bumi Resources, and will shortly hold a third round of talks.
“We have a solution, which this board can deliver, which will end the infighting, which will see the removal of the Bakries, see the removal of a troubled asset Bumi Resources,” von Schirnding said. “I am confident we will be able to achieve that separation. That separation can only be achieved with this board, not a board with Nat Rothschild on it.”
Analysts at Liberum Capital Ltd. and Barclays said unwinding the Bakrie deal is more achievable than Rothschild’s plan. Von Schirnding aims to complete the separation by April and hopes to offer assurances to shareholders on the Bakries’ financing abilities before next month’s vote, he said.
He is seeking assurances from the Bakries that they will be able to fund the cash component of their offer and said he’ll be enforcing the terms of the October offer. Share price movements mean that proposal is “now very attractive to Bumi Plc shareholders,” the company said in a presentation.
The Bakries, as a founding shareholder, will seek to enforce a clause in the original deal giving them the right to nominate the CEO, should Rothschild regain control, Bumi said. This would lead to a stalemate and an ongoing dispute between the two sides which could take “years” to resolve, von Schirnding said.
Rothschild would “be the first to admit that he’s been incredibly surprised at the way this has actually turned out,” Andy Brough, executive director of Schroder Investment Management in London, said in an interview with Bloomberg Television yesterday. “If they can sort it out, potentially there is quite a lot of upside here. The value of the asset in the ground is still there.”
Schroders Plc head of U.K. equities Richard Buxton has said the changes in personnel Rothschild proposes would benefit Bumi, according to the Financial Times. Rothschild’s plan also gained the backing of Stoneycroft Ltd. yesterday. The family trust of Monsoon Plc founder Peter Simon owns a 0.35 percent stake in the company.
BlueCrest Capital Management LLP founder Michael Platt also supports the financier’s proposal to replace the board, Rothschild’s NR Investments Ltd. said today in a statement. Platt owns 344,247 Bumi shares. Investor David Alliance, owner of 350,000 shares, also backs the plan, he said in a statement.
Bumi is “very confident” shareholders will vote in favor of the existing board, von Schirnding told reporters on a conference call yesterday.