B

uoyed by the country’s growing automotive industry, Singapore-listed investment company Gallant Venture Ltd. is proposing to acquire a 52.35 percent stake in Jakarta-listed PT Indomobil Sukses Internasional in a S$988.2 million (US$809.3 million) transaction that will increase the Salim Group’s share in the company.

Gallant informed the Singapore Stock Exchange on Friday that it had signed a day earlier a conditional and purchase agreement with PT Cipta Sarana Duta Perkasa, which currently holds a 52.35 percent stake in Indomobil, one of the two largest automotive groups in Indonesia.

According to its website, Gallant is 53.36 percent owned by Indonesian conglomerate Salim Group. The purchase of Cipta Sarana’s stake in Indomobil will boost Salim Group’s control of the automotive company as the conglomerate, through its subsidiary PT Tritunggal Intipermata, already owns an 18.05 percent stake in Indomobil.

Salim Group used to be majority shareholder in Indomobil. However, the Asian financial crisis in late 1990s forced the company to sell part of its ownership.

Gallant said that it would finance acquisition in four ways: issuing convertible bonds amounting to S$80 million ($65.4 million) and non-convertible bonds worth S$104.7 million to Cipta Sarana, seeking loans from financial institutions amounting to S$128.2 million and selling 2.41 billion new shares in a non-underwritten rights issue to gain around S$675.3 million.

“Accordingly, on completion of the sale and purchase, the vendor [Cipta Sarana] will ultimately receive from the company approximately S$803.5 million in cash and the bonds,” Gallant said in a filing with the Singapore Stock Exchange.

The convertible bonds, if they are executed on maturity period in the next five years, will give Cipta Sarana a 4.93 percent stake in Gallant.

Following the proposed transaction, Gallant will perform a tender offer for the remaining shares in Indomobil. In a tender offer scheme, according to regulations from the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK), a company acquiring more than a 50 percent stake in a publicly listed firm is required to buy the firm’s remaining shares and sell them again to the public within two years.

The company will buy Indomobil shares at Rp 5,420 (54 US cents) per share during the planned tender offer. Shares in Indomobil (IMAS) fell 2.8 percent to close at Rp 5,200 on Friday from Rp 5,350 a day earlier following the announcement of the acquisition plan.

The acquisition is pending completion of the sale and purchase agreement. However, Gallant said that it expected to complete the acquisition before June 13, 2013.

Gallant said that acquisition of Indomobil would help diversify the company’s portfolio, particularly in the automotive industry. Gallant has four core businesses; namely utilities industrial parks, resort operation and property development and mining in Indonesia, as well as property development in China.

Indonesia’s auto market saw 1.03 million cars sold as of the end of November and is expected to reach 1.1 million vehicles by year end, according to figures from the Indonesian Automotive Industry Association (Gaikindo).