Bumi Chairman’s Plan to Double Stake Incurs Wrath of Rothschild

Bumi Plc Chairman Samin Tan’s agreement to buy out the Bakrie family from the Indonesian coal producer has provoked the ire of financier and fellow shareholder Nathaniel Rothschild.

Tan’s PT Borneo Lumbung Energi & Metal agreed to pay the Bakries $223 million for their 23.8 percent stake in Bumi, the Jakarta-based company said yesterday in an e-mailed statement. The deal will double Tan’s holding to 47.6 percent and make him the biggest shareholder.

Bumi has been at the heart of a battle for control between co-founders Rothschild, scion of a centuries-old British banking dynasty, and the Bakries, one of Indonesia’s wealthiest families. Each made rival proposals last year to unwind the $3 billion deal that brought them together in London in 2011.

Rothschild, who owns 14.8 percent of Bumi, said in an interview this week the latest moves were “another choreographed stitch-up between the Bakries and Samin Tan.” The offer outlined is part of a two-stage exit from Bumi for the family, revising a nine-month-old separation plan. A second transaction involves the Bakries paying more than $500 million to buy back a 29.2 percent stake in coal exporter PT Bumi Resources sold to Bumi in 2011.

Borneo “hopes to see, and will endeavor to restore, stability in Bumi Plc so as to allow its management to refocus on activities that create value for all stakeholders,” it said in the statement.

Coal Prices

The Borneo-Bakrie deal is subject to conditions, including a waiver from Borneo having to make a general offer for Bumi. The purchase will reduce the average price Tan has paid for Bumi stock to 675 pence a share from 1,090 pence, Borneo said. Bumi last traded at 259.3 pence on April 19. The Bakries said they sold the shares at $3.89, or about 257 pence, each.

The agreement marks an “important first step toward separation although it has not been an easy or simple process,” Chris Fong, executive vice president of the Bakrie Group, said in a statement. “The Borneo transaction is the direction we have taken, there are no other options on the table.”

Tan said last month he has lost about $800 million on the value of his initial January 2012 purchase of 23.8 percent of Bumi from the Bakries for $1 billion. There were concerns that Borneo would have difficulty funding the deal given a drop in coking coal prices, said Erindra Krisnawan, a Jakarta-based analyst at PT CIMB Securities Indonesia.

Deal Finance

Borneo said it made a voluntary prepayment of $50 million toward a $1 billion loan facility. It has paid back $170 million of the loan and has the funds ready for the Bumi purchase, Alexander Ramlie, president-director of Borneo, said in an e-mailed statement.

The company is also studying a bond sale to refinance the balance of its existing debt after the Bakrie acquisition is completed.

The deal that Bumi and the Bakries put forward in October included a share swap that would lead to the Bakries’ shares in the London-listed company being canceled.

Bumi’s independent directors will assess any Bakrie separation proposal before it can be put to shareholders for a vote, the London-based company said July 10.

Rothschild said yesterday those directors “should not dare to recommend this deal in its current format as minorities won’t support it.” He attacked the price offered by Borneo Lumbung. “We will see whether institutional shareholders are foolish enough to sell Bumi Plc to Mr. Tan for a very low price at the low-point in the cycle.”

The 41-year-old financier has proposed that the Bakries’ Bumi stake be offered to existing shareholders, rather than sold to Tan, who could instead underwrite the offer and be free to buy any stock not taken up.

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