Oct 17, 2011

Bumi Plc drops BRMS takeover, CB off?

Bumi Plc, London-based company, finally today announced that the proposed takeover of 75% stake in noncoal company PT Bumi Resources Minerals Tbk (BRMS) won't proceed as uncertainty market situation. 
Referring to the announcement, will the proposed US$2.07 billion convertible bonds issuance be automatically ceased?
Prior to the announcement today, Indonesia's largest thermal coal exporter PT Bumi Resources Tbk (BUMI) for the secondly decided to delay extraordinary of shareholders meeting (EGM) to October 21 2011. In an official statement submitted to Indonesia Stock Exchange (IDX), Bumi Director Dileep Srivastava said the company intends to delay the EGM to October 21 from the previous schedule on September 26.
Dileep said the delay is a result of the additional agendas regarding to the proposed shares sale in its non-coal subsidiary, BRMS as required by the regulation of IX.E.2 about Material Transaction and the Change of Main business. Bumi will publish further announcement on the shares sale on September 19. 
Previously, Bumi intended to schedule the EGM on August 23 with two agendas, the shares sale of BRMS and the proposed shares buyback.
On June 10, Bumi Plc, previously dubbed Vallar Plc, announced a 75% stake acquisition of BRMS by Bumi Plc in return for US$2.07 billion convertible bonds (CB) to be issued by Bumi Plc with a 2% coupon and a £15.88 initial conversion price to Bumi Resources. The bonds are convertible into new Vallar voting ordinary shares.
The acquisition price of Rp850 per share represents a 21.9% premium to Bumi Minerals's 30 day average closing price of Rp697 per share to 27 May 2011.
The question is who will agree a 19% interest debt converted into 2% interest CBs with 17% spread? At the announcement published by Bumi Plc, the BRMS proposal is expected to complete in the third quarter of 2011 and will require approval of Bumi voting ordinary shareholders.  If the transaction is expected to complete in the third quarter, the question is why Bumi has secondly delayed the EGM? Is it just a strategy to cease the deal?  
Bumi Plc today dropped 2.35% to £7.48 per share and Bumi Resources rose 3.33% to Rp2,325 per share. BRMS fell 1.54% to Rp640 per share.

Disclosure: No position at the stock mentioned above.  

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