Rothschild told to give up £40m

INFLUENTIAL Indonesian family the Bakries yesterday called on financier Nat Rothschild to give up his 12 per cent shareholding in miner Bumi, worth more than £41m.

The Bakrie brothers, who own 23.8 per cent of London-listed Bumi, want Rothschild to give up his 16m bonus shares in Bumi, which he was awarded when his acquisition vehicle Vallar bought Bumi assets last year.

The bonus shares were awarded on the condition of the deal between the Bakries and Rothschild being a success. The Bakries now want the financier’s shares cancelled, to stop them diluting other investors’ stakes.

A source with knowledge of the situation said that the Bakries’ request is no more than a “passing dig” at Rothschild, planned as a diversionary tactic from the ongoing investigation into the alleged financial irregularities at PT Bumi, the Indonesian arm of the London-listed parent firm, which was announced last month.

Another source told City A.M. yesterday that the Bakries were “disappointed and upset that the relationship hasn’t worked”.

Yesterday morning, the Bakrie family asked to cancel its shareholding in Bumi, offering to take back the Indonesian assets they brought in less than two years ago, effectively suggesting a share swap to end their tumultuous working relationship.

The Bakries would then buy back the remaining 18.9 per cent stake in PT Bumi in cash before Christmas.

The powerful Indonesian family has also proposed to buy out Bumi’s 84.7 per cent stake in PT Berau Coal Energy, an Indonesian coal mining firm, within the next six months.

No financing details have been given, although it is thought Credit Suisse has been working with the Bakries to discuss funding for the potential sale.

Bumi’s board is now considering the proposals. It is thought that the separate parts of the deal are not contingent on each other, meaning the board does not have to accept all of them.

If Bumi accepts all parts of the deal, it will be left as a $1.3bn (£810m) cash shell – similar to the Vallar vehicle that Rothschild founded in 2010 before renaming the venture Bumi.

A source with knowledge of the situation said yesterday that the board would give the Bakries’ offer some “serious thought”, although they added that selling out of PT Bumi and Berau could be a controversial move, as the coal price is at a two-year low. “Both PT Bumi and Berau are really good quality assets,” said a source. “They offer exposure to China which is reliant on coal-fired power stations. Now might not be the time for Bumi to sell out as the economic case for remaining involved is quite strong.”
However, ties are so severed with the Bakries that it is believed the family think that their offer is a “compelling win-win to bring the relationship [between Rothschild and the Bakries] to an end”.

The proposal came as the Bumi board met yesterday in Singapore, where it is thought it was given an update on the Indonesian investigation by City law firm Macfarlanes.

The results of the investigation are understood to be expected in several weeks’ time.

Investors reacted positively to the Bakries’ offer yesterday, as shares in the London-listed miner yesterday closed up 39.47 per cent at 259p, recovering some of the heavy losses it sustained when the investigation was announced.

ANATOMY OF A DEAL GONE WRONG

NAT Rothschild’s bold adventure to launch a shell company and involve the colourful Bakries has drawn in many of the City’s big players. JP Morgan Cazenove, Credit Suisse and Evolution pushed the IPO of Rothschild’s cash shell Vallar at £10 a share in 2010. The shares have since lost almost 75 per cent. Influential directors worked with Bumi through its IPO, including Julian Horn-Smith, Lord Renwick, Steven Shapiro, Graham Hearne, James Campbell and Robert Sinclair. Former JP Morgan Cazenove rainmaker Ian Hannam is thought to have brokered the “divorce” deal between the Bakries and Bumi, and is being advised by City PR firm Maitland, who is also advising the Bakrie family. PR firm Finsbury advised Rothschild on Vallar’s IPO, but parted ways following Rothschild’s leaked letter to the Bakries, in which he called for a radical clean up of the Indonesian operations last year. Finsbury still advises Bumi, while Rothschild is now advised by Powerscourt.