Bakries Reveal $65 Million Shortfall in London Exit Deal

Indonesia’s Bakrie family are $65 million short of funding a planned exit from London-listed Asia Resource Minerals Plc and want to revise the terms a week after saying they intended to complete the deal as scheduled.

The Bakries raised $163 million, less than the $228 million needed under the 2012 deal, Asia Resource Minerals, the coal producer formerly called Bumi Plc, said in a statement.

That conflicts with November comments from Bakrie spokesman Chris Fong, who said funding had been available since January 2013 as a “direct cash investment” from the family.

While financing had previously been available, “due to the protracted process some of these funds have been diverted for unrelated purposes,” Fong said today in e-mailed comments. “Our ability to recoup the difference via external funding has been impacted by the drop in PT Bumi Resources share price.”

Bumi Plc was founded in 2011 as financier Nathaniel Rothschild agreed to buy stakes in two Indonesian coal producers including the Bakries’ PT Bumi Resources. After the deal soured, a plan to unwind the investment stalled as the family, founders of a palm oil-to-property empire dating from 1942, sought financing.

The comments by Fong “lack credibility,” Rothschild, who owns about 21 percent of the voting rights in ARMS, said today in e-mailed comments. ARMS investors “have waited 14 months, so we can wait a little longer for the Bakries to honor original terms, which shareholders voted to accept in December 2013.”

‘Intent’ on Exit

The Bakries said last week they were “intent” on exiting “on the same commercial terms as previously agreed.” At the same time, they cited “challenges” over the slump in Bumi Resources’ share price, down 52 percent in Jakarta since Oct. 10, 2012, a day before the split was announced in London.

The two-part transaction involves the family buying back 29.2 percent of Bumi Resources, the biggest Indonesian coal exporter, from ARMS. Meanwhile, ARMS’s Chairman Samin Tan buys 23.8 percent of ARMS from the Bakries for $223 million.

ARMS said yesterday the Bakries sought an extension to the deadline to complete the deal to Feb. 26, from Feb. 21, and a revision of its terms. An independent committee of the ARMS board believes the revision isn’t material and the deal is “clearly in the best interests of shareholders,” it said.

The revised terms mean the Bakries will buy back 25.4 percent of Bumi Resources, leaving ARMS with 3.8 percent.

‘Material Change’

“It is very hard to argue that a cash reduction of $65 million on a $501 million deal is not a material change,” Rothschild said in e-mailed comments yesterday. “I would be very surprised if this ‘new’ transaction can proceed without being put back to shareholders.”

ARMS dropped 2.9 percent to 236.50 pence at 9:32 a.m. in London today, giving it a market value of 570 million pounds ($949 million).

Chief Executive Officer Nick von Schirnding has previously said he planned to return more than $400 million to investors through dividends after the deal.

“We believe we are on track to close the separation transaction this month which will finally restore stability and shareholder value,” Bakrie Group’s Fong said today.

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