Rothschild fears Bumi ‘divorce’ will lead to cheap asset sale

Financier Nat Rothschild fears a £750m “divorce” deal proposed by his partners in FTSE 250 coal group Bumi could offer them a backdoor way to acquire all of the company’s assets.

Bumi is a major exporter of thermal coal

The plan was the Bumi would bring great Indonesian coal assets to a London market – but it has faced major hiccups.

6:55PM BST 12 Oct 2012

Nat Rothschild fears a £750m “divorce” deal proposed by his Indonesian partners in coal group Bumi could offer them a backdoor way to acquire all of the company’s assets.

The Bakrie Group, controlled by Indonesia’s powerful Bakrie family, has offered to sever ties with FTSE 250 group Bumi and buy up its stakes in its two Indonesian subsidiaries, leaving it as just a cash shell. Mr Rothschild is understood to have concerns that the Bakries’ exit could hand them a way to buy one of its assets on the cheap.

Should he decide to oppose a deal, the financier could risk a clash with other non-executive directors on Bumi’s board.

Board members are said to be pleased with the offer for one of the subsidiaries, Bumi Resources, and the chance to cut links with the Bakries – although they may decide to keep Berau, the other subsidiary.

Markets have also reacted well to the idea that Bumi could end the turbulent relationship between Mr Rothschild and his supporters on the board and the Bakries. Bumi’s shares on Friday climbed to reach 280p, up 8pc, having jumped 39.5pc on Thursday.

Mr Rothschild has recommended that he and the rest of the board should wait for the conclusions of an independent investigation into “potential financial irregularities” at Bumi Resources before taking any decisions. However, he is understood to be sceptical about the proposed deal, which, if agreed in full, would see him give up around £44m of founder shares in Bumi.

Agreeing to just the first part of the plan – swapping the Bakries’ shares in Bumi for all or part of the subsidiary Bumi Resources – could pave the way for them to obtain Berau also, which many analysts think Bumi should keep. That is because cancelling the Bakries’ 24pc Bumi stake will inflate the holdings of its other shareholders, taking the amount controlled by fellow Indonesian investors Samin Tan and Rosan Roeslani to around 44pc.

Sources close to Mr Rothschild said: “We have grave concerns that they would use their augmented control of the equity to approve the Bakries’ additional offer for Berau, selling the asset for much less than it is worth.” Both parties have ties with the Bakries, although their relationship with Mr Tan is said to have been strained by the fall in Bumi’s share price.

Sources close to the Bakries denied that they were working in cahoots with the other Indonesian investors. It is thought that Mr Rothschild does not want to give up his founding shares, as the Bakries say he should if Bumi’s assets are sold

Categories: Asset and Resource Hoarding, Societal

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