Credit Suisse and Freshfields Criticized by U.K. Regulator

  • Advisers to Indonesian coal deal given rare public criticism
  • Regulator says JPMorgan's role in Bumi deal `disappointing'

The U.K.’s takeover regulator took the rare step of publicly criticizing advisers Credit Suisse Group AG as well as law firms Freshfields Bruckhaus Deringer LLP and Holman Fenwick Willan LLP for their conduct in a controversial $3 billion Indonesian coal deal in 2010.

The regulator complained about the advisers failure to properly consult the Takeover Panel on whether the Bakrie Group, a family owned palm oil-to-property empire founded in Sumatra in 1942, and Bukit Mutiara, headed by Rosan Roeslani, could be considered “concert parties.” The term refers to people who agree to cooperate to take control of a company or stop a deal from proceeding.

Both Indonesian parties were advised by Credit Suisse and Holman Fenwick Wilan on the deal with Nathaniel Rothschild’s Vallar Plc, which would subsequently be renamed Bumi Plc. Vallar was advised by JPMorgan Chase & Co., who’s conduct was described by the regulator as “disappointing,” and Freshfields.

“Each of the advisers knew of facts or connections between the Indonesian parties which the panel considers were relevant to the concert party issue, and which should have been brought to the panel’s attention” before the deal, the panel said in a statement on its website.

Rare Censure

The Takeover Panel rarely issues public criticism of advisers and this is only the second statement of its type in the past five years. Prior to that, the most high profile public reprimand by the regulator was its ruling on Kraft Foods Inc. in 2010 that it misstated plans to keep a plant open as part of its acquisition of Cadbury Plc.

Today’s statement is the culmination of a three-year probe by the regulator after it ruled in 2012 that both the Bakries and Roeslani were acting in concert to control 50.3 percent of the voting rights in Bumi. The company, later renamed Asia Resource Minerals Plc, was the focal point of one of London’s most-public corporate disputes in recent years highlighted by boardroom infighting, financial probes and ongoing legal disputes.

The panel ruled that Bakrie Group and Bukit Mutiara reduce those rights to less than 30 percent by disposing of shares. That forced Roeslani, who indirectly controlled Bukit Mutiara, to resign from the Bumi board. He later became embroiled in a dispute with the company, which won a Singapore arbitration ruling ordering Roeslani to pay Bumi $173 million in missing funds. Roeslani has challenged the ruling.

‘Terrible Mistake’

Rothschild, who would later describe the deal as a “terrible mistake,” and the Bakries decided to unwind their collaboration less than two years after striking the deal. The company’s market value deteriorated amid corporate wrangling and a slump in coal prices.

“Credit Suisse takes its regulatory responsibilities very seriously and has fully cooperated with the U.K. Takeover Panel during its investigation,” it said in an e-mailed statement. It “regrets its conduct in 2010 and 2011, has accepted the panel’s findings and has taken appropriate action to ensure that its high standards of conduct are upheld at all times,” the bank said.

Deal Adviser

JPMorgan was also an adviser on the Indonesian deals and its conduct was described as “disappointing but not sufficiently serious to merit public criticism,” the panel said. JPMorgan declined to comment.

Rothschild said he welcomed the statement from the Panel.

“The directors of Vallar cooperated fully with the panel’s investigation and no criticism whatsoever is levelled at them by the Panel,” he said. “This is in stark contrast to the Panel’s expressed disappointment at the conduct of Vallar’s financial advisers, JPMorgan, and its public criticism of Vallar’s legal advisers, Freshfields.”

Freshfields said it accepted the panel’s conclusion that the law firm failed to provide some relevant information, but there was no intention on the part of any of the advisers to mislead, according to an e-mailed statement from the law firm.

Holman Fenwick Willan said the panel’s “statement was issued with the consent of all parties involved and, as such, it is not appropriate for us to make further comment.”

(An earlier version of this story corrected the role of legal advisers Freshfields and Holman Fenwick Willan.)

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