Jun 28, 2011

BUMI step-up equals Rp2,825/share

Vallar Plc yesterday announced that Bumi Plc has entered into sale and purchase agreement (SPA) with number of PT Bumi Resources Tbk (BUMI) shareholders in pursuant to its step-up transaction of which Bumi Plc will purchase an aggregate of 800.33 million shares of BUMI (represent 3.9% of BUMI’s issued ordinary shares) in consideration of the issue of 13.88 million shares of Bumi Plc’s voting shares. 
The transaction is expected to close on 5 July 2011. Bumi Plc’s shareholding in BUMI will increase up to 28.9%. This is part of the step-up transaction series necessary to enter the FTSE100 premium listing. 
Based on Bumi's Plc closing price yesterday, this transaction would translate into BUMI share price of Rp2,825/share or about 6.6% lower than BUMI closing price of Rp3,025. 
"Our take is that this theoretical conversion price of Bumi Plc is lower than the current BUMI’s actual market price which made the transaction looks less attractive for existing BUMI’s shareholders. But Bumi Plc is still aiming to increase its shareholding at BUMI up to 51% until 3Q11," said analyst Herman Koeswanto at Mandiri Sekuritas in an investor digest published today.
Under FTSE Ground Rules, one of the main conditions that must be met is that Bumi Plc needs to have a free float of not less than 50%. And currently the minimum market cap for the top 80 of FTSE 100 stock is GBP3.3 billion vs Bumi Plc’s (Bumi LN Equity) current market cap is around US$2.5 billion. But once the 75% BRMS acquisition is done, Bumi Plc’s market cap will potentially adjust up to US$3.3 billion (after incorporating the proportionate of BRMS’s market cap). 

Disclosure: No position at the stock mentioned above.

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