Bumi Stake Sale May Hinder Rothschild Bid to Have Board Replaced

Nathaniel Rothschild’s bid to gain control of Bumi Plc, the coal venture at the center of his dispute with Indonesia’s Bakrie Group, may struggle to win support after a major holder sold a 13 percent stake.

Rosan Roeslani, an associate of the Bakries, sold about 24.2 million shares of the London-listed company to three separate investors, according to a statement yesterday. The sale increases the amount of votes Rothschild will need to win at the Feb. 21 shareholder vote on his plan to oust most of the board. The voting rights associated with those shares had previously been excluded by a U.K. Takeover Panel ruling.

The development came as a commissioner at the OJK -- Indonesia’s financial services regulator -- said Bumi may be required to make a takeover of its Indonesian unit PT Bumi Resources should Rothschild succeed in removing the board.

“As of yesterday, the voting outcome of these new buyers is still unclear,” Alexander Ramlie, a director of Bumi Plc, said today in an e-mail. “The results of the shareholder votes would probably be very tight for either side.”

Bumi Plc was founded in 2010 when Rothschild and the Bakries bundled stakes in two Indonesian coal companies -- Bumi Resources and PT Berau Coal Energy -- in a $3 billion deal. Both parties have made proposals to shareholders that would separate the Bakries from Bumi Plc, a move the board is also pursuing.

Shares Gain

Bumi advanced 0.5 percent to 396 pence by the close in London. The stock, which slumped 69 percent in 2012, has rebounded 43 percent this year. Bumi Resources rose 7.5 percent to 1,000 rupiah in Jakarta, the highest close in six months.

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. The panel has rejected an appeal against its concert-party ruling, it said in a statement today.

The buyers of the 13.4 percent in Bumi held by Roeslani’s Recapital Group -- Avenue Asia Capital Management LP, Argyle Street Management Ltd. and Flaming Luck Investments Ltd. -- will be free to vote at the meeting, according to a statement from Recapital that cited the panel. That will increase the number of votes Rothschild must win to succeed in ousting the board.

Avenue Capital Group declined to comment on the purchase and the Tanoesoedibjo family-controlled Flaming Luck couldn’t be reached for comment.

Standard Life

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.

Standard Life Investments, which holds about 2.2 percent of Bumi Plc, said today it would vote against all of Rothschild’s resolutions.

“The restructured Bumi Plc board has the best prospect of exiting the Bakrie relationship and maximizing long-term value for the remaining shareholders,” London-based Head of Equities and Executive Director David Cumming said in a statement.

“We have made clear to Bumi the importance we attach to the successful restructuring of its board and the strengthening of its executive team,” Cumming said. “These are prerequisites for restoring confidence and delivering the returns shareholders expect.”

Rothschild said today the outcome of the Feb. 21 meeting would depend on the U.K. Takeover Panel’s “decision to admit new shareholders at the 11th hour.” Rothschild and Standard Life “agree on many things,” the financier said in an e-mailed statement. “We both agree that this board and the existing management team needs to be restructured.”

Regulator’s View

Should Rothschild’s bid to remove 12 of Bumi Plc’s 14 board directors succeed and be deemed to constitute a change of control at Bumi Resources, it would trigger a mandatory offer for the remainder of Bumi Resources’ shares, the OJK’s Nurhaida, who goes by only one name, said yesterday in Jakarta. Bumi Resources is 29 percent-owned by Bumi Plc.

“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.” Nurhaida didn’t say whether board changes at Bumi would constitute a change of control.

Rothschild said today in a separate statement that votes in favor of his resolutions on Feb. 21 wouldn’t constitute a change in control, with shareholdings before and after the meeting substantially the same.

“Bumi Plc has never had ‘control’ over Bumi Resources,” he said. “There has never been any agreement or legal transfer of control rights to Bumi Plc.”

The OJK’s Nurhaida said control is defined as an ownership in excess of 50 percent, or having the ability to control certain aspects of the company such as appointing directors or management, even with a stake of less than 50 percent.

Before it's here, it's on the Bloomberg Terminal.