Sale of SG shares to local investor gets more support

The Jakarta Post , Jakarta | Mon, 05/01/2006 11:09 AM | Business

The Jakarta Post, Jakarta

The sale of Cemex's shares in the country's largest cement maker PT Semen Gresik (SG) to local investors is being regarded as the best possible option for the resolution of the SG problem, and the revitalization of the cement industry.

""It will help create a more balanced market and a healthier business competition,"" said Didik J. Rachbini, chairman of the House of Representatives Commission VI, which oversees state-owned enterprises, and a former member of the Business Competition Supervisory Commission (KPPU).

Didik said Indonesia's strategic cement industry had, in terms of business competition, ""reached a critically low point"", especially since foreign firms ""took over major local cement producers"" which were offered cheaply after the 1997-1998 Asian financial crisis.

""It wouldn't be a problem if this had resulted in a more fair business competition in the market, but these international cement firms are practicing a cartel, monopolizing the local market after having controlled its local industry,"" he said Sunday.

""That's why local companies should be encouraged to buy back Cemex' shares (in SG).""

Vice President Jusuf Kalla said Friday the government wanted to see local investors purchase Cemex's 25.53 percent stake in the publicly-listed SG, which is still 51 percent owned by the government, to help avoid a cement cartel if SG falls into the control of foreign investors. German-based Heidelberg now controls PT Indocement Tunggal Prakarsa, while Swiss-based Holcim Ltd controls PT Holcim Indonesia, formerly known as Semen Cibinong.

In March, a senior government official said Cemex, the world's third largest cement maker, planned to unload its SG stake in a bid to end a four-year dispute with the government over its plan to become the majority shareholder in the East Java-based SG, with a price tag of about US$500 million.

The plan came after the Mexican giant filed a complaint with the International Center for the Settlement of Investment Disputes in Washington D.C. against the government of Indonesia, accused it of failing to fulfill its side of an investment deal made in 1998. Cemex demanded compensation worth $500 million.

But analysts said that if the sale of Cemex shares goes through, the case will be dropped, freeing the cash-strapped government of the huge penalty risk.

The SG fiasco started when Cemex bought a 14 percent share in SG from the government in 1998. Cemex then bought another 11.53 percent stake from the stock market. Under the conditional sales and purchase agreement signed with the government, the latter promised to sell additional shares to Cemex within three years of the deal being made, to allow the Mexican company to become a controlling shareholder in SG.

But successive new governments have been unable to fulfill the promise, amid opposition from some workers, politicians, and SG subsidiaries PT Semen Padang and PT Semen Tonasa, in a fiasco that has not only frustrated Cemex but has also hindered the development of SG.

The new government, via State Minister of State Enterprises Sugiharto, made various offers to settle the dispute, including offering Cemex a new plant in West Java. But the latter turned down the proposal and instead chose to abandon its SG investment.

Several foreign firms, including Australia's construction giant Boral, and France's Lafarge Group, which now owns 88 percent of local cement maker PT Semen Andalas, are reportedly vying for the SG stake. Local interested investors include the Rajawali and Sampoerna groups.

But recent unconfirmed reports say Rajawali, owned by businessmen Peter Sondakh, has been in final talks with SG to close the transaction.

The Rajawali Group is noted for a number of successful investments in the country. It co-founded the country's first private-owned TV station, RCTI, now one of the most popular TV stations in the country; and the country's first private-owned cellular telecommunications operator, PT Excelcomindo Pratama, which has been able to compete with the giant state-owned PT Telkomsel and PT Indosat. The cash-rich Rajawali has sold its investments in these two companies. The group was also credited with successfully turning around the loss-making cigarette maker PT Bentoel.

As Sampoerna, also a cash-rich conglomerate, is losing its charm at home due to some recent failed investment deals, some feel Rajawali is likely to win the SG stake.

I-box:

SP gets unqualified opinion

West Sumatra-based cement maker PT Semen Padang (SP), a 100 percent subsidiary of PT Semen Gresik, said Sunday it had settled concerns raised by its auditor on its 2005 financial report.

Company president Endang Irzal said Sunday, quoted by news portal detik.com, that public accounting firm PriceWaterhouseCoopers gave its opinion after the company managed to ""settle various problems with regard to its financial reports.""

SP's financial reports for 2002 and 2003 received a disclaimer from its auditors due to unaccountable transactions and chronic accounting problems, affecting SG's consolidated financial report as well. The clean bill of health should bode well for SG's plans to seek bank loans to finance future expansion. -- JP

Comments (0) | Post comment

A | A | A |