Bumi Says $501 Million Deal Lacks Bakrie Funds CertaintyJesse Riseborough
Bumi Plc, seeking to sell its stake in an Indonesian coal producer for $501 million next month, said it has received no proof that founding shareholders the Bakrie Group can finance their share of the transaction.
“It would’ve been our clear preference to have the monies in escrow, but clearly these are challenging times for the acquirers of the stake and these are challenging times for the coal business,” Nick von Schirnding, chief executive officer of Bumi, said today on a conference call. “We have not had proof of funding. We have no visibility on any of their funding.”
Bumi has been at the center of a battle for control between the Bakries and fellow founder Nathaniel Rothschild, scion of a British banking dynasty. Weaker coal prices, board infighting and probes in the U.K. and Indonesia have weighed on the stock, which plunged 69 percent last year as each made rival proposals to unwind the $3 billion deal that brought them together in 2010. Shareholders will vote on the separation deal on Dec. 4.
“We’re being asked to vote on a deal when in fact there’s no money in place,” Rothschild, who holds about 21 percent of the voting rights for Bumi stock, said today in a phone interview. “There’s absolutely no certainty as to whether or not the deal can actually be consummated by the buying party.”
Funds for the Bakries’ $278 million share of the offer have been available since January in the form of a “direct cash investment by the Bakrie family,” Chris Fong, a spokesman for the Bakrie Group, said in an e-mail today. “No doubt this protracted process has impacted across our other investments, but market conditions must be accounted as a major hurdle.”
A deposit by the Bakries of $50 million has been made into an escrow account with Deutsche Bank AG, with an additional $228 million needed for the transaction, Von Schirnding said.
The Bakries have “no intention of losing” the escrow payment and “the balance will be made available at the right time,” Fong said.
Bumi, owner of stakes in two Indonesian coal suppliers, has agreed to sell its 29.2 percent interest in PT Bumi Resources to the Bakries as part of a two-step plan to separate from one of Indonesia’s wealthiest families.
Bumi Chairman Samin Tan has agreed to buy the Bakries’ 23.8 percent holding in Bumi Plc for $223 million. Both have pledged that the necessary financing will be in place to complete the deal, Von Schirnding said today.
“Of course, we are aware these are difficult times for them,” he said of the Bakries. “They have given us assurances that the funding will be in place by the time or shortly after” the shareholder vote, he said.
Bumi gained 4.5 percent to 234.25 pence in London trading, the highest closing price in more than three months, valuing the company at 564.4 million pounds ($902 million). The separation arrangement leaves Bumi with 76 percent of PT Berau Coal Energy, Indonesia’s fifth-biggest coal exporter.
The shareholder meeting in London on Dec. 4 will also vote on a name change to Asia Resource Minerals Plc, Bumi said today in a statement. The PT Bumi sale was agreed on at a 116 percent premium to the current market value, according to the statement. Bumi confirmed plans to return at least $400 million, or about 103 pence a share, in cash to shareholders.
The deal needs to win the support of 50 percent of independent shareholders, including Rothschild, 42, who has railed against the transaction before. Von Schirnding said he planned to start talks with shareholders today on the deal.
“We have been working as you’d expect on a number of alternate contingency plans,” he said. “None of those is as value accretive or attractive as this transaction on the table.”
Bumi said in June it had agreed with Rosan Roeslani, a former board member and ex-CEO of unit PT Berau, on the repayment of $173 million of funds and assets in return for waiving any potential claims against him.
A group led by three Indonesian investors including Roeslani last month bought a 70 percent stake in Italian Serie-A soccer team FC Internazionale Milano SpA. Newspaper Corriere Della Sera reported in September that an Inter Milan stake sale had been agreed on for about 300 million euros ($411 million).
Roeslani has failed to repay an initial $30 million due by Sept. 26, Bumi said today. The company has started arbitration proceedings against him on the payment, it said.
“We will pursue all options to enforce this agreement and to recover funds,” Von Schirnding said. “It’s disappointing that the first $30 million was not paid to us. There are a bunch of highly technical legal arguments that are being used, which we disagree with, and we are taking it to arbitration.”
Rothschild said Bumi’s board should make clear to shareholders that its failure to recover the missing funds represents a “material change” to the terms of the deal.