Govt, Rajawali rush to finalize SG deal

The Jakarta Post , Jakarta | Tue, 07/11/2006 5:11 PM | Business

Rendi Akhmad Witular, The Jakarta Post, Jakarta

Lawyers for the government and the diversified Rajawali Group were locked in a marathon meeting Monday as they rushed to finalize a deal for the sale of Cemex SA's shares in state-controlled cement producer PT Semen Gresik (SG) to Rajawali.

Until late in the evening, both sides were still engaged in negotiations, although Mexican-based Cemex gave only until Monday to complete the SG stake transaction. Cemex has already delayed the closing from the initial July 3 deadline.

""We are still negotiating. It may end until late this (Monday) night. But I can't speculate on the next step that we will take should the transaction fail to be completed today,"" said Rajawali managing director Daryoto Setiawan.

He explained that lawyers from Rajawali and the government were still discussing several issues related to compensation as well as the group's special rights and authority in managing the country's largest cement producer once it acquired the SG stake.

The Office of the State Minister for State Enterprises hired Hadiputranto, Hadinoto & Partners to act on its behalf during the negotiations, while Rajawali is represented by Minangwarman & Associates.

A major stumbling block is Rajawali's demand to receive sufficient compensation should the government insist the group sell the shares to companies owned by local administrations.

""There should be some compensation should the government request that we sell some of our shares to regionally owned companies on top of the agreed share price,"" said Daryoto.

The group also requested the production director post in the SG management, a demand which has been opposed by the government as it deemed the group did not have adequate experience in the cement industry.

Daryoto said that some privileges initially enjoyed by Cemex in SG, based on its conditional sales and purchasing agreement (CSPA), should also be partly granted to Rajawali, which wanted to have a role in the company.

After a protracted dispute, the government has finally agreed to the decision by Cemex to sell a 24.9 percent stake in SG -- of the 25.5 percent stake it owned -- to Rajawali for US$337 million, as part of Cemex's exit strategy to end a five-year dispute with the government.

However, the government has demanded that Cemex drop its arbitration lawsuit against the government, which had been accused by the Mexican firm of failing to fulfill the 1998 CSPA.

Meanwhile, State Minister for State Enterprises Sugiharto hoped to sign an agreement with Rajawali later this week to allow the company to settle the transaction.

""The draft of the agreement is expected to be finished later today so that the agreement can be signed in the coming days,"" Sugiharto said Monday.

He added that the government would not grant Rajawali privileges similar to those provided to Cemex.

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