Govt to reject Rajawali bid for Cemex stake in Semen Gresik

The Jakarta Post ,  Jakarta   |  Thu, 05/18/2006 1:11 PM  |  Business

Rendi Akhmad Witular, The Jakarta Post, Jakarta

The government will turn down the request from Mexican-based cement giant Cemex S.A. to approve an offer from the Rajawali Group to purchase Cemex's shares in state-owned cement maker PT Semen Gresik (SG).

The decision by the government to use its ""first right of refusal"" appears likely to sink the settlement of the already protracted dispute between the government and Cemex over the later's right to take eventually control of SG based on a deal made in 1998.

A source at the State Ministry for State Enterprises said the government would refuse to give its approval to Cemex to sell the stake to Rajawali, and would instead appoint a third party, consisting of local companies, to purchase the stake.

However, the acceptance of new investors will be subject to Cemex approval. Should the company refuse to approve the government's new bidder, it will force both parties to seek other investors -- signaling another setback to a settlement.

""The government will tell Cemex that it will use its right as the majority shareholder to buy the company's stake at the same price offered by Rajawali, but through a third party as the government does not have enough funds available,"" said the source.

He refused, however, to name the third party, but rumors in the stock market say that it will be a consortium made up of a number of state and local government-owned companies formed by the government to take control of the stake.

Cemex recently signed a deal with Rajawali, controlled by tycoon Peter Sondakh, to sell the SG stake for US$337 million.

But the transaction is subject to government approval, with the deadline for this being Thursday.

Based on the 1998 deal, it is Finance Minister Sri Mulyani who has the right to make a final decision on the Cemex case, not the state minister for state enterprises, as the matter is related to the management of state assets.

The source said State Minister for State Enterprises Sugiharto has advised Mulyani on how to respond to the request, with Mulyani eventually agreeing to the options put forward by Sugiharto and his officials.

Cemex, the world's third largest cement maker, wants to sell the SG stake after the government failed to fulfill an investment deal made in 1998 to allow Cemex to gradually become the majority shareholder in SG.

The management of Semen Padang and some politicians in Jakarta and West Sumatra adamantly opposed the deal in 2002. They were eventually supported by the both the local and central governments.

Cemex then filed a complaint against the government of Indonesia with the International Center for the Settlement of Investment Disputes in Washington D.C.

At present, Cemex owns 25.5 percent of the shares in the publicly listed SG, with 51 percent being controlled by the government and the remaining 23.5 percent by the investing public.

Meanwhile, PT Andalas Tuah Sakato (ATS), a firm wholly owned by the West Sumatra administration, said it had received financial support from Singapore-based investment firm Pan-Asia Presidio Capital Advisors Pte Ltd to purchase the Cemex stake.

""Presidio has agreed to provide some $400 million for the purchase of the stake. However, Cemex has yet to respond to our offer. We are hoping the government will help us secure the stake for the sake of the West Sumatran people,"" said ATS president director Suharman.

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