London. Indonesia’s politically connected
Bakrie family has agreed to a $640 million deal to sever ties
with coal miner Bumi Plc, all but ending their
ill-fated London adventure after two years of bitter boardroom
Last October, as tensions between shareholders escalated,
the family announced they planned to draw a line under the
London deal. They then proposed a $1.4 billion deal to buy back
with shares and cash the coal assets they brought into the
company, set up with financier Nat Rothschild in 2010.
The Bakries, though, have faced opposition from both the
board and Rothschild to the full plan to take back all the
Indonesian assets. Both Bumi’s current management and the hedge
fund veteran and want to retain coal miner Berau, 85 percent
owned by the London group, and avoid unraveling Bumi.Both hope to revive Bumi, a company that was intended to
bring undervalued assets to European investors, but which has
instead become emblematic of institutional investors’ worries
about governance of foreign resources firms listed in London.
Under Tuesday’s deal, Bumi’s board agreed the family should
pull out as a stakeholder and take its minority 29 percent share
in Bumi Resources. That unit — over which the London
company struggled to exert control — has been at the center a
probe into possible wrongdoing at Bumi’s Indonesian operations.Tuesday’s terms outline a deal that will see the Bakries
cancel an indirect 23.8 percent stake in Bumi in exchange for
10.3 percent in Jakarta-listed Bumi Resources. Bumi Plc would then sell the remaining 18.9 percent stake it
holds in Bumi Resources to the Bakries for $278 million in cash.
To ease investor concerns over the debt-burdened Bakries’
ability to fund the cash portion of the move, Bumi said a $50
million portion of that sum was due by Friday, as a break fee.The $278 million, moreover, will be placed in escrow within
five days of a definitive agreement.The deal is a step towards resolving tensions that have
rattled investors and battered London-listed Bumi’s shares.But whether it will be carried out will hinge on the outcome
of a shareholder meeting next week, at which Rothschild will
seek to oust 12 of Bumi’s 14 current board members, bringing in
a team that includes his own return as executive director.
A Rothschild victory on Feb. 21 would invalidate the current
deal, under conditions set by the Bakrie family, now bitter
rivals of their one-time partner.Rothschild, for his part, questioned the conditions set on
the Bakrie exit and whether Tuesday’s deal was achievable.
“If Bakrie [Group] is really exiting Bumi plc why do they
care who they sell to?” he said in a statement. “A $50 million deposit is equivalent to 13 pence per plc
share. Since we launched our [shareholder meeting] the stock has
risen from 265p to 404p, and this is not because of the current
Bumi’s volatile London-listed shares ended the day at 404
pence, up 4.9 percent.