It is hard to see how City financier Nat Rothschild and the Bakries, an Indonesian business dynasty, can reconcile their differences. Together they created Bumi plc, a London-listed vehicle into which the Bakries injected stakes in some Indonesian coal mines. But they have fallen out so badly that the Bakries, alongside fellow Indonesian shareholder Samin Tan, want to oust Mr Rothschild as co-chairman.
This would be bad for shareholders, including the Bakries and Mr Tan, who, with an associate, wield 43 per cent of the votes. Bumi has the usual paraphernalia of independent directors. But Nat has been a higher-profile guarantor that corporate governance would aspire to mainstream UK standards. His ejection would further damage a personal reputation already compromised by the row with the Bakries, while ensuring that Bumi’s shares traded at a persistent discount.
The Bakries’ move appears to reflect a loss of confidence in the aristocratic company promoter after he went public last year with complaints about the management of Bumi Resources, a heavily indebted affiliate. However, the rift may also bespeak mutual disappointment at the failure of Bumi plc to join the FTSE 100 index and attract tracker fund investment. The relative underperformance of Bumi plc’s shares discouraged Indonesian minorities in Bumi Resources’ Jakarta-listed stock from swapping into the London-quoted company. That held down the market capitalisation, with the result that Bumi plc joined the less glamorous FTSE 250 instead. Either side could blame the other, if so minded.
Senior independent director Julian Horn-Smith should don anti-thrombosis socks and hop on a flight to Indonesia to negotiate a rapprochement between Nat and Indra Bakrie, Bumi plc chairman. Alternatively, both men could step down in favour of a non-executive chairman unaligned with either. But if the Bakries simply tighten their grip on the board, Bumi plc’s supposedly top-notch corporate governance arrangements would be revealed as the charade that some observers have long suspected.
Independent investors were right to demand a premium for their consent to the $88bn merger of commodities group Glencore and miner Xstrata. Glencore has a poor record on premiums. Its adviser-heavy float last May failed to deliver an expected 5-10 per cent share price uplift to investors. The company would have disappointed minorities again – though in Xstrata, this time – had it executed a nil premium all-share merger with the miner, in which it holds a 34 per cent stake.
The interests of Mick Davis, Xstrata chief executive, and minorities appear poorly aligned. Mr Davis, who previously advocated a stiff control premium, stands to become chief executive of the combined group. This could mean the former academic, already the best-paid executive in the FTSE 100 by some measures, would qualify for a pay rise. Mr Davis could also receive a £5.7m pay-out triggered by a change of control, although he may waive all or part of the amount.
Investors in Xstrata, which is expected to announce disappointing results today, are being offered 2.8 shares in the merged business for each share held in the miner. Glencore shareholders, most of them executives in the Swiss-based group, would swap on a one-for-one basis. The predicted 8 per cent uplift is calculated by comparing this 2.8:1 ratio against closing prices last Wednesday, just before merger talks were announced. Then, one Xstrata share was worth 2.59 Glencore shares.
A premium of 8 per cent is lower than some analysts had forecast. A cynic would expect the merger partners to cite other share price measures – perhaps long-term averages – to make the sweetener look more toothsome. But the premium level is less contentious than in a cash offer, where it represents compensation for improved dividends forgone.
If you board a New York sightseeing bus operated by Twin America, a joint venture of Stagecoach, among the sights you can be sure of seeing are a lot of other Twin America buses, albeit in two different liveries. The Surface Transport Board, a US regulator, says Twin America dominates its market and has suggested dissolution of the alliance as one remedy.
Another solution would be for New York to stimulate competition by issuing a number of licences for sightseeing operators. This would expose tourists to the bracing experience of being kerb crawled by double deckers touting for trade. It was through such enterprising tactics that Stagecoach embarked on its expansionary career in the newly deregulated UK bus industry of the 1980s.
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