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Anger following a demand for an internal investigation by London-listed Bumi Plc. into its Indonesian subsidiaries has led to the Bakrie family calling an end to its 19-month business venture with Nathaniel Rothschild, heir to the legendary banking family.
The Bakries, represented by PT Bakrie and Brothers (BNBR) and Singapore-based Long Haul Holdings, have proposed revoking their indirect stake in Bumi Plc. and taking back control over their crown-jewel company, PT Bumi Resources (BUMI), the world’s largest thermal coal exporter.
According to a statement published on Bumi Plc.’s website, the proposed transaction is intended “to unwind the relationship” between Bumi Plc. and the Bakrie Group interests and return everything “as far as possible” to the position that existed before the series of transactions that aligned them last year.
The statement emerged after a meeting between Rothschild and Indra Bakrie in Singapore on Wednesday evening. The statement reveals that BNBR and Long Haul propose to exchange their joint ownership of 23.8 percent shares in Bumi Plc. for its 10.3 percent shareholding in BUMI and to buy Bumi Plc.’s remaining 18.9 percent shares in BUMI for approximately US$278.3 million in cash before Dec. 25.
BNBR and Long Haul also made another offer to purchase Bumi Plc.’s entire 84.7 percent holding in PT Berau Coal Energy (BRAU) with completion by June 30, 2013. No price has been set for this purchase.
Bumi Plc. said it was considering the proposal and would make recommendations to its shareholders.
According to a BNBR executive, a meeting is already scheduled with potential lenders next week as the company plans to finance the transaction partly through loans, probably involving Credit Suisse and JP Morgan.
Trust Securities analyst Reza Priyambada said the fallout with the London venture stemmed from concerns regarding corporate governance. BUMI and BRAU, he said, had always filed their financial reports, but inside information was what mattered. “Are they telling the truth in the information submitted to the Indonesia Stock Exchange? Did they really carry out the things they said they did? We need to know those things,” he said.
Bumi Plc. has launched an internal investigation of the subsidiaries for alleged financial irregularities pertinent to assets estimated to be worth $500 million, which include an investment in oil and gas exploration in Yemen. The Singapore meeting was supposed to hear an update on the investigation from London-based law firm Macfarlanes.
Reza said Bakrie’s split from Bumi Plc. could cause the company to lose access to the European market.
“Being able to expand into Europe was the initial target, but ever since the companies joined forces, they have been involved in internal conflicts. They did not reach the target,” he said.
Capital market and financial analyst Lin Che Wei said Bumi Plc.’s internal disputes, which involved the politically connected Bakrie family, had a negative impact on Indonesia’s capital market situation. The family’s patriarch, Aburizal Bakrie, is the Golkar Party presidential candidate for the 2014 election.
“To foreigners, it would seem as though there is too much political interference in Indonesia’s investments. The disputes have created a bad image for Indonesian corporations in general as well,” he said during a telephone interview.
Lin, however, credited the family for its ability to survive life-threatening challenges in the past. “The Bakrie business empire, is like a cat, it has nine lives. It just won’t die.“
After the split announcement, both BUMI and BRAU saw their share prices grow. On Thursday, shares of BUMI and BRAU closed at Rp 720 (7.5 US cents) and Rp 200 apiece, respectively, a rise of 5.9 percent and 34.2 percent from the previous day.