Bumi Plc shareholders should oppose a planned $501 million deal to separate the coal producer from Indonesia’s Bakrie family, said Pensions & Investment Research Consultants Ltd., a U.K. adviser to institutional investors with more than 1.5 trillion pounds ($2.4 trillion) in assets.
Changes to the proposed transaction from its original form last year, uncertainty around how Chairman Samin Tan and the Bakries will finance it and the failure to recover $173 million of missing funds underpin the voting recommendations, according to a PIRC report dated today that was obtained by Bloomberg News. A spokesman for Bumi declined to comment.
Bumi shareholders are set to meet in London on Dec. 4 to vote on the plan that will see the Bakries exit the company they founded with financier Nathaniel Rothschild in 2011. Tan has agreed to buy the family’s holding in London-listed Bumi, giving him a 47.6 percent stake in the company.
Bumi, owner of stakes in two Indonesian coal suppliers, has agreed to sell its 29.2 percent interest in Jakarta-based PT Bumi Resources to the Bakries as part of the two-step transaction to separate from one of Indonesia’s wealthiest families. Tan has agreed to buy the Bakries’ 23.8 percent holding in Bumi Plc for $223 million.
Bumi has received no guarantees of financing from the Bakries, Chief Executive Officer Nick Von Schirnding said two weeks ago. Tan is due to provide evidence of financing by tomorrow, according to a Nov. 8 shareholder document.
“It is highly inappropriate to ask shareholders to approve a transaction where there is no guarantee over the affordability of the counter-parties to honor their payments,” PIRC said. While the advisory group sees “major merits” in separating from the Bakries, shareholders are being asked to approve a deal with “many uncertainties,” it said.
Funds for the Bakries’ $278 million share of the offer have been available since January in the form of a “direct cash investment by the Bakrie family,” Chris Fong, a spokesman for the Bakrie Group, said Nov. 8.
The deal needs to win the support of 50 percent of independent shareholders, including Rothschild, 42, who has railed against the transaction before and owns about 21 percent of the voting rights for Bumi stock.