T

he government’s plan to merge PT Kimia Farma and PT Indofarma through a share swap is expected to be completed in the first half of the year, a senior official at the State-Owned Enterprises Ministry said.

Deputy minister for restructuring and privatization at the ministry, Pandu Djajanto, said in Jakarta on Friday that talks in relation to the share swap were already conducted with Kimia Farma. He revealed that the talks covered up how many shares would be swapped.

“However, I cannot reveal the specific number now,” he said.

The government recently announced that the share swap would be an option in combining the two pharmaceutical companies. The merger is part of the ministry’s policy to reduce the number of state-owned firms to 120 from 141 this year.

The share swap will be performed before Kimia Farma’s rights issue, which is expected this June.

Pandu said that Kimia Farma would allocate funds to be raised from the rights issue as working capital and the amount of the shares after the right issue would be used as the basis for the merger.

However, according to Pandu, a formal meeting with Indofarma’s officials had not yet been carried out. “This is because we are still awaiting the company’s development after the recent quasi reorganization,” Pandu said.

Last December, Indofarma’s shareholders approved the company’s plan to perform a quasi reorganization by revaluating its assets. The quasi re-organization aims to eliminate Indofarma’s total deficit of Rp 57 billion with a requirement that the company books net profit in the next three years. Revaluation measures will make Indofarma’s assets stand above Rp 1 trillion.

The asset amount has been an issue in setting up a holding company for state-owned pharmaceutical firms. Kimia Farma’s total assets were Rp 1.84 trillion as of September last year, while Indofarma’s total assets reached Rp 912 billion in the same period.

Indofarma’s president director Djakfarudin Junus said that asset revaluation and quasi reorganization would make his company become more confident to compete in the pharmaceutical business.

Djakfarudin said that the share swap option was a high level idea, which had not been communicated to his company.

“We remain clueless about how the swap will be performed. This is an owner [the government] action, not a corporate action,” he said.

Djakfarudin said that any measure relating to the regrouping of state-pharmaceutical companies had to consider both the performance and healthiness of each company.

“Indofarma is getting better and healthier. The company’s share price is also increasing,” Djakfarudin said.

Kimia Farma president director Syamsul Arifin said that any measures toward the merger had to await formal government regulation. However, he said that Kimia Farma expected that the shares swap would be performed at the same time with his company’s rights issue.

“According to the latest instructions, the share swap will be performed before the rights issue. However, we hope we can do these measures at the same time. If those measures are performed simultaneously, we don’t have to conduct two different shareholders meetings to seek approval for the rights issue and share swap,” he said. (rcf)