Feb 14, 2012

Rothschild venture Bumi holds talks

Top directors at coal miner Bumi Plc will hold crisis talks in Jakarta on Tuesday, hoping to broker a boardroom deal barely a week after Indonesian shareholders said they planned to oust co-founder Nat Rothschild and others.
Investor Samin Tan and Indonesia's Bakrie Group, as quoted by Reuters, who together own 29.9 percent voting rights in Bumi, said earlier this month they were seeking to replace Rothschild, currently co-chairman, and other senior board members including James Campbell, the former head of Anglo American's coal division.
That announced, a bitter and unexpected blow to Rothschild, rattled investors in Bumi, has since knocked 16 percent off Bumi's shares and revived worries over governance at a company that owns some of Indonesia's richest coal mines and is one of the world's biggest thermal coal exporters.
City veteran Julian Horn-Smith and former diplomat Robin Renwick, two of the Bumi board directors the Indonesian shareholders did not try to eject, are due to hold talks with Tan and the Bakrie team, Tan's investment vehicle and sources close to the companies said.
Tan himself will be in London in the days that follow that, hoping to sell his vision for the company to key institutions.
A source close to Bumi denied reports that Tan's visit would also attempt to test market appetite for an additional share sale by Bumi, ostensibly to raise cash for investments in base metal miner PT Bumi Resources Minerals Tbk, which is majority owned by PT Bumi Resources Tbk, the coal miner in which Bumi Plc has a 29 percent stake.
"Bumi Plc has no plans to raise additional capital this year," the source said.
The talks between Horn-Smith, Renwick and representatives of the Bakries and Tan are aimed at hammering out a compromise, with the Indonesian contingent under pressure from Bumi's institutional investors, many of whom bought into the idea of a promising asset that would see its governance improved by the involvement of Rothschild and others, and its debt slashed.
Neither has happened, they complain, and fighting over the company's governance has become a potentially damaging sideshow.

"What is most important to us is how the company operates -- to manage the mines well and get rid of this debt burden. Anything that distracts from that, such as the ongoing public exchange between the various parties is just total pantomime which reflects badly on all concerned," said Ali Miremadi, a partner at Taube, Hodson and Stonex, a top 30 investor in Bumi.
"We would definitely prefer that Nat Rothschild stays, but frankly these squabbles between the various parties -- Nat, the Bakries and now Tan -- have been a massive distraction."
Bumi Plc is currently trading around 743.5 pence, over a third below the price at which it relisted last June, and at a discount to the sum of its parts.
"The people who invested in the first place invested (in Rothschild's original shell company, Vallar) on the basis of the deal that Nat was going to do. I think the deal has great strategic merit. It just hasn't been executed to plan yet," said analyst Richard Knights at Liberum in London.
"The step-up transactions didn't occur, and the company still only has 29 percent of PT Bumi. The story in PT Bumi is a very good one, if you can deleverage it."
Rothschild himself, who owns just under 12 percent of Bumi, is expected to be forced to sacrifice his role as chairman, but could remain on the board as part of a compromise deal. Rothschild's relationship with the Bakries, his one-time allies, soured in recent months, and the former hedge fund manager heightened tensions in November, when a frustrated letter sent to the chief executive of both Bumi Plc and Jakarta-listed PT Bumi was leaked to the press.
Under the proposals floated earlier this month, Tan would become chairman, alongside Indra Bakrie as co-chairman.
Top directors at coal miner Bumi Plc will hold crisis talks in Jakarta on Tuesday, hoping to broker a boardroom deal barely a week after Indonesian shareholders said they planned to oust co-founder Nat Rothschild and others.

Disclosure: No position at the stock mentioned above.  

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