Coal miner Bumi confirmed yesterday that the Bakrie family has committed $50m (£32m) to a ring-fenced account to act as a break fee for their buy-back of Bumi’s Indonesian division Bumi Resources, in the clearest sign yet that the intended divorce between both sides will go ahead and the months of bitter infighting can finally come to an end.
The former communications man, appointed to head up the struggling miner in December, has been thrown into one of the biggest challenges of his life at Bumi.
Amid battling to save the reputation of the company and the ailing share price – it closed up yesterday at 404p, compared to its 2011 peak of £14 – he has endured shareholder and co-founder Nat Rothschild challenging his CV, claiming the chief executive fudged some of his qualifications. Bumi was quick to denounce the accusations as “false”, adding that the former Anglo American exec was hired for his “experience and competence”.
The accusations that his CV qualifications are inaccurate are “just complete nonsense”, von Schirnding tells City A.M. He is clearly livid about such personal attacks.
“I’m happy with my qualifications, and my reputation speaks for itself. The important thing is that people who know me do not believe that, they can see it for what it is,” he adds.
Attacked from several angles, he is a man in an incredibly difficult position, but remains determined to pull the company out of one of the biggest scandals the City has ever seen.
The future of the beleaguered coal miner will be decided next Thursday, when the Bumi board and Rothschild meet in a bitter battle to decide who will take ultimate control of the company.
Rothschild wants to overthrow 12 of the current 14 board members – including the new chief executive and chairman Samin Tan – and replace them with a new board, with the financier parachuted back into an executive role.
Both sides have been hastily canvassing shareholder support in the run-up to 21 February, which will ultimately decide the future direction of the company.
Rothschild has garnered some powerful supporters in the form of institutional shareholders Schroders and Taube Hodson Stonex, and John Dodd at Artemis came out last night to voice his backing for Rothschild’s board changes.
Supporters for the Bumi board have been less forthcoming, although New York-based hedge fund Route One has publicly given its backing.
“The EGM is a waste of time and shareholder funds,” says von Schirnding. “Our solution is very clear – to affect a separation from the Bakries, and allow Bumi to be in control of its own destiny.”
But, it all hinges on whether the Bakrie family can pull together the $278m needed to buy themselves out of London-listed Bumi.
“The funding is crucial. The escrow account with funds keeps the Bakries on the hook,” says von Schirnding.
“If investors see a key way to separate the two, that key point will swing the vote. Otherwise it’s cheap talk.”
Separately, spokesman Chris Fong reassured City A.M. earlier this week that the Bakries could raise the necessary funding, although he declined to say where the funds would come from.
Critically, Rothschild’s proposals halt the separation of Bumi and Indonesian Bumi Resources, as the Bakries will enforce the relationship agreement – which allows them to appoint a chief executive and chairman – to remain on the board.
“Giving Nat Rothschild a second chance at being chief executive again is a recipe for continued strife and further value destruction, as the Bakries will remain on the board. To go back to Nat is very high risk,” says von Schirnding.
“The alternative to our proposal would be utter chaos – mired in litigation with the Bakries.”
Although the future of the company centres on how investors vote at the EGM next Thursday, von Schirnding is confident, almost bullish, on the company’s outlook if Rothschild’s proposal is rejected.
“We will separate from the Bakries, remove the management and shareholder structure and introduce totally independent management,” he says.
“We have a very clear way forward. We need to get rid of the troubled asset to maximise value for shareholders.”
Even without the Indonesian arm Bumi Resources, Bumi will hold “world-class” coal assets in majority-owned subsidiary Berau, demonstrated by a strong trading update posted by Bumi yesterday. Coal sales at Berau leapt 30 per cent year on year in the fourth quarter, and operational management has been strengthened with the appointment of Eko Budianto as chief executive and von Schirnding’s former Anglo colleague Tony Redman as technical adviser.
The Bumi scandal hasn’t dented Von Schirnding’s belief in the London market, or operating successfully in foreign markets, though. It’s quite simple what went wrong, according to him: “Rothschild brought a flawed model to the London market, and gave control of both entities to the Bakries.
“Bumi has just been a bad experience of Indonesia.”
As for the outcome of next Thursday’s meeting, von Schirnding is quietly upbeat, and says he has been making progress with shareholders. He needs at least 50 per cent of voting shareholders to flatten the counter proposals, and told City A.M. that he was “confident” he could win.