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State firm walks away from Bumi buyout
State-owned coal company PT Tambang Batubara Bukit Asam (PTBA) has officially scrapped a plan to buy a stake in a coal company controlled by the politically wired Bakrie family, saying the price is too high
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State-owned coal company PT Tambang Batubara Bukit Asam (PTBA) has officially scrapped a plan to buy a stake in a coal company controlled by the politically wired Bakrie family, saying the price is too high.
PTBA president director Sukrisno said Tuesday it had pulled out from a consortium led by Northstar Equity Partners, a local arm of U.S. buyout giant Texas Pacific Group, which agreed on Nov. 1 to purchase a 35 percent stake in PT Bumi Resources.
The stake belongs to publicly listed investment firm PT Bakrie & Brothers, the flagship of the Bakries.
“As a state firm, the public will ask for our accountability. If the price of Bumi’s shares is now only Rp 800 (6 US cents), why should we buy the shares at Rp 2,000?” Sukrisno said.
“The offering price is just too expensive compared to the current price,” he added.
PTBA’s announcement came ahead of Northstar’s planned timetable to complete its due diligence on Bumi so as to close a deal this week.
Sukrisno said PTBA would prioritize its spending on expansion next year, including the construction of 584.2 kilometers of railway tracks costing $694 million to link its mine in Tanjung Enim, South Sumatra, with the nearest ports.
The company’s pulling out of the Bumi deal has eased concern, at least for now, over the involvement of state firms, originally at the request of President Susilo Bambang Yudhoyono, to join in on the bailing out of the heavily indebted Bakrie family — key financiers of Yudhoyono’s 2004 campaign.
Bakrie & Brothers has been selling assets as the company is in dire need of immediate funds to enable it to make repayments on its $1.2 billion of debts collateralized by pledges of shares in a number of its companies.
Capital market analyst Yanuar Rizky welcomed the decision by PTBA to pull out because the company had been putting public money at risk.
“But other concerns remain, especially over the possible involvement of state banks and insurance companies in the deal,” he said.
Sources in the market believe the proposed deal between Bakrie and Northstar was just a “smoke screen” to help the Bakries buy time so they could secure sufficient funds to cover their debts, and wait for the Bumi shares to return to more feasible levels to facilitate their proposed transactions.
However, Bakrie & Brothers’ management has repeatedly denied such speculation.
Analysts say the Bakries are unlikely to relinquish control of Bumi — the family’s most prized company and the world’s largest thermal coal exporter — because it accounts for about 88 percent of Bakrie & Brothers’ annual consolidated profits.
Bumi shares soared by 20 percent to Rp 850 from Rp 710 during Tuesday trading on a report by Bloomberg that U.S. investment company T. Rowe Price Group Inc. was buying up the Bumi stake in the market.
A recent research report from UBS Securities Indonesia states the most Bakrie, minority shareholders and creditors can hope for is that Bumi shares rebound and then stay above Rp 4,500.
“This will eliminate most of the dire refinancing situation. Collateral loan/value ratio will be restored to a reasonable 2x. This is the happiest ending outcome for Bakrie, minority shareholders and creditors,” the report said. (hwa)
