FEW corporate situations have been quite as embarrassing for the reputation of the City of London as the preposterous mess that is currently Bumi. Bumi’s origins date back to the creation of a special purpose vehicle called Vallar, led by Nat Rothschild, that raised £600m in June 2010 for the purpose of investing in the mining sector.
In what seemed to be a love-in between west and east, Rothschild teamed up with the Bakrie family, one of Indonesia’s most powerful, and used the money from the flotation of Vallar to set up Bumi, a thermal coal company with interests in the largest coal-producing assets in Indonesia, the world’s biggest exporter of thermal coal.
The group’s key assets are PT Berau which is the country’s fifth largest coal producer and a 29 per cent interest in PT Bumi, which is the biggest coal producer in Indonesia.
Rothschild was all aglow at the time with the joys of new found love. The trouble is that the love affair, which was consummated within two weeks of meeting, soon petered out and has degenerated into acrimony, with both sides accusing the other of foul play.
Rothschild has bemoaned the Bakrie’s lack of what he considers to be good corporate governance whilst they have accused him of spying and generally being difficult to work with.
The losers in all this are the investors who backed Rothschild and his colleague James Campbell at the beginning at £10 a share. If they’re still in the stock, they have shares now worth less than 300p.
Like most divorces, this one is messy. It is also ridiculously complicated, with at least three sets of divorce proposals being put on the table.
The Bakries have one proposal, Rothschild has another and the company, led by its new chief executive Nick von Schirnding, with whom we have an interview in today’s edition on page 12, has a third.
Rothschild’s hopes of winning his proposal, which involves buying out the Bakries as well as shareholders Samin Tan and Rosan Perkas Roeslani, depends partly on the Takeover Panel deciding the three of them represent a concert party under the City’s takeover code.
A decision, which could limit the three shareholders to a 29.9 per cent share of the vote (rather than the 55 per cent they actually own), is due any day soon. If the decision goes against him, Rothschild will have a tough job getting his deal through even with the 28 per cent of shareholder support he claims. and he may have to withdraw, leaving the other two deals in pole position.
Analysts at Liberum believe the proposal from Bakrie is an appealing one, given current circumstances.
“If the Bakrie exit goes through, shareholders will be left to decide whether they feel the Bakrie offer of $950m is firm (we would question this) and whether it represents good value (13.4x 2013 price earnings ratio on our numbers),” says Liberum.
“Either way, the Bakrie offer at £4.40 a share offers a substantial premium to the current share price (271p), and increased ownership in a much less leveraged and slightly higher margin Berau is an appealing proposition.”
But first, all concerned are waiting on the Panel. Its decision is a complicated one but shareholders in Bumi could do with an end to the uncertainty they currently face.
Much as Takeover Panel members, led by Robert Gillespie, might wish to push the matter into the long christmas grass, an early decision would be appreciated by all concerned, not least by investors for whom this game has now been going along for too long.
Allister Heath is away