Last updated: December 12, 2012 7:36 pm

Bumi prefers Bakries’ plan to Rothschild’s

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Coal mining from PT Bumi Resources in Indonesia.©Bloomberg

Bumi, the troubled miner, is backing the Bakries over financier Nat Rothschild as it seeks to end a year-long shareholder war over corporate governance and effect the Indonesian family’s exit from the London-listed company.

The Bumi board said it could not formally recommend the Bakries’ offer to split from the company while it was investigating alleged financial irregularities at its Indonesian holdings. Also the UK Takeover Panel is deciding whether several Indonesian shareholders were concert parties.

But Sir Julian Horn-Smith, the senior independent non-executive director, said the board preferred the Indonesian proposal over one put forward by Mr Rothschild.

“Our next step is to go beyond the [Bakries’] simple letter into a specific proposal with the “i”s dotted and “t”s crossed which results in the exit of the Bakries from the company,” he told the Financial Times.

Bumi plc’s holdings are 29 per cent of the Jakarta-listed Bumi Resources, which the Bakries control, and 85 per cent of Berau Coal Energy, also listed in Jakarta. The Bakries own 23.8 per cent of Bumi plc. Under the Bakrie plan, the family will swap their Bumi plc shares for about a third of Bumi plc’s stake in Bumi Resources and then buy the rest of Bumi plc’s stake in Bumi Resources for $278m.

The Bakries also want to buy Bumi plc’s Berau shares but the Bumi plc board said on Wednesday that “it is not and never has been the intention of the board” to pursue the offer on Berau.

Mr Rothschild’s offer is similar to the first two stages of the Bakries’ offer but is predicated on two other Indonesians – Bumi plc chairman Samin Tan and Rosan Roeslani, who together own 33 per cent of Bumi plc – selling their shares.

Mr Rothschild, who founded Bumi in 2011 by reversing the Indonesian holdings into London-listed Vallar, said on Monday he had the backing of sufficient Bumi plc shareholders to block the Bakrie offer and implement his proposal. Sir Julian said on Wednesday that the board did not believe him and that neither Mr Tan nor Mr Roeslani intended to sell.

Mr Rothschild, who owns 11 per cent of Bumi plc, on Wednesday said he was disappointed by the board’s decision and “in doing so [it] had ignored the stated wishes of minority investors holding approximately 28 per cent of the voting shares of the company”. He said he would continue to pursue his restructuring plan.

The open warfare has contributed to Bumi plc’s share price falling more than 70 per cent in the last year. On Wednesday if closed down 4.85 per cent at 270.8p.

The Bakries said on Wednesday they had the money needed to buy Bumi plc’s Bumi Resources shares and would still like to buy Berau but “will start the negotiations when Bumi plc are ready”.

The Bumi plc board announced that Nalim Rathod, chief executive and a close Bakrie associate, would step down at the end of the year. He will be replaced by Nick von Shirnding, Bumi’s head of investor relations.

It also confirmed a Bakrie claim that information on which it is investigating alleged financial irregularities at its Indonesian holdings was obtained illegally by email hacking

Bumi would not give details about the investigation conducted by Macfarlanes, a London law firm, into the alleged irregularities at Bumi Resources and Berau Coal Energy.

A statement said any further writedowns as a result of the probe would not have a material effect on the company and that the board was still taking the allegations of alleged financial irregularity seriously despite the information being obtained illegally.

The statement released by the board did not say who might have perpetrated the hacking.

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