Bumi Board Change May Force Offer for Unit, Regulator SaysWidya Utami and Harry Suhartono
A Nathaniel Rothschild victory at Bumi Plc’s meeting this week may force the company to buy out shareholders in a subsidiary, said a commissioner at Indonesia’s financial services regulator, the OJK.
Should Rothschild’s bid to oust the Bumi board be deemed to constitute a change of control at PT Bumi Resources, the Indonesian coal company 29 percent-owned by Bumi Plc, it would trigger a mandatory offer for the remainder of Bumi Resources’ shares, the OJK’s Nurhaida, who goes by only one name, said today in Jakarta.
“In the event of a change of control, the capital market regulations are clear,” she said. “The new controlling party must conduct a tender offer.”
Rothschild has called the Feb. 21 extraordinary general meeting in an attempt to replace 12 of the 14 directors of Bumi Plc. An outcome in his favor would trigger the change of control clause, according to the Bakrie Group, Rothschild’s adversary in the battle for Bumi Plc. Rothschild is seeking to oust the board, including its chairman and chief executive officer, while also pursuing a separation from the Bakries, his co-founders in the London-traded Indonesian coal company.
That would leave a new Bumi Plc board responsible for as much as $8 billion in payments, said Bakrie spokesman Chris Fong, citing a Relationship Agreement struck by the Bakrie Group and the Bumi Plc board in 2010 that would allow it to name the chairman, CEO, and chief financial officer of Bumi Plc.
A new board could face “a mandatory tender offer of the remaining shares of Bumi Resources, which will be valued at $4 billion,” he said. “In addition, creditors will require debts to be settled, which amounts to another $4 billion.”
The OJK’s Nurhaida didn’t say whether board changes at Bumi Plc constitute a change of control, and she declined to comment on any takeover price.
Rothschild said in an e-mail today that Bumi Plc has never had control of Bumi Resources, which means that the Relationship Agreement is irrelevant. Bumi Resources “is controlled by the Bakries, who appoint all of its senior management, do what they like with its assets, and ignore other shareholders,” he said.
The OJK’s Nurhaida said control is defined as an ownership in excess of 50 percent, or having the ability to control certain aspect of the company such as appointing directors or management, even with a stake of less than 50 percent.
“Bakrie’s ownership is less than 50 percent, but because there’s an agreement, Bakrie is the party in control,” she said. “We will see if there is any change to this condition after the EGM.”
The fight for control over Bumi Resources may boost its share price, as both parties try to increase their voting power in the coal producer, Frederick Daniel Tanggela, an analyst at Trimegah Securities in Jakarta, said.
“Bumi Resources is a speculative buy,” Tanggela said by telephone today, adding the Bakries and Rothschild may “buy the shares in the market.” Bumi Resources shares rose 9.4 percent to close at 930 rupiah in Jakarta Jakarta time, its highest level since Aug. 24.
Berau President Director Rosan Roeslani’s Recapital Group said today that it had sold its 13 percent holding in Bumi Plc. Recapital’s 24.2 million shares had a market value of 91.3 million pounds ($141 million), based on the Feb 15 closing price, according to Bloomberg calculations.
The Takeover Panel ruled in December that the Bakrie Group and Roeslani’s PT Bukit Mutiara, which together controlled 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.
Bumi Plc advanced 4 percent to 393.9 pence by 1:47 p.m. in London.