Bumi Seeks to Complete $501 Million Bakrie Deal This YearJesse Riseborough
Bumi Plc, the Indonesian coal producer at the center of an ownership dispute, is seeking to complete a planned $501 million separation from founding investors the Bakrie Group by the end of the year.
“We are finalizing the key documents now with various regulators,” Chief Executive Officer Nick von Schirnding said in a phone interview. The “economic terms” of the deal remain consistent with what has been announced, he said, declining to comment on whether there’ll be changes to other terms.
For longer than 18 months, Bumi has been at the heart of a battle for control between Indonesia’s Bakrie family and Nathaniel Rothschild, scion of a centuries-old British banking dynasty. The shares sank 69 percent in London last year as each side made rival proposals to unwind the $3 billion deal that brought them together in 2010. The stock was also hurt by lower coal prices, board infighting and probes in the U.K. and abroad.
Bumi, owner of stakes in two Indonesian coal suppliers, has agreed to sell its 29.2 percent holding in PT Bumi Resources to the Bakrie Group as part of a two-step plan to separate from the family. Bumi Chairman Samin Tan has agreed to buy the Bakries’ 23.8 percent interest in Bumi Plc for $223 million.
Information on the separation is due to be sent to shareholders in a circular this week before a vote.
Von Schirnding said in August he couldn’t guarantee the Bakries could fund their exit from the company by buying back the stake in PT Bumi they vended into the original deal. He said Bumi Plc was arranging to have the $501 million placed in escrow before the shareholder vote.
Von Schirnding declined to comment yesterday on whether the funds are in escrow. “We need to wait until the circular comes out before commenting in detail.”
Bumi gained 3.9 percent to 202 pence by the close in London yesterday. The stock has dropped 26 percent this year, valuing the company at about 487 million pounds ($776 million).
Bumi plans a “substantial” cash return to investors from the proposed sale of its PT Bumi stake to the Bakries, it said in July. The company’s proposal to return about $400 million in cash remains accurate, von Schirnding said yesterday.
Bumi also said yesterday that coal output gained 10 percent in the third quarter, even as prices remained “challenging.” Production from its PT Berau Coal Energy mines rose to 6 million metric tons from 5.5 million tons a year earlier, it said in a statement. The cost of sales dropped 6 percent in the first nine months of the year to $36.80 a ton, Bumi said.
The company owns 76 percent of PT Berau, which is traded in Jakarta. The average sale price in the quarter was $58.50 a ton, an 18 percent decline from a year earlier. Bumi maintained its full-year production forecast of 23 million tons.
“While coal prices have moved off their lows, the near-term outlook remains challenging,” von Schirnding said in the statement. “We remain very focused on operational improvements and efficiencies, which is our priority in the current weak coal-price environment.”