bumi update

Nathan Rothschild

Reports in the press today that Ol Natty is close to finalising funding for an additional $270m from investors which looks to be money to be used to buy out the balance 15% of Berau Coal from the Bakries.

Nat Rothschild, the financier behind coal miner Bumi Plc, has secured the backing of mining entrepreneur Robert Friedland for his proposal to unwind the London-listed company’s relationship with Indonesia’s influential Bakrie family.

Mr Friedland, the billionaire who founded Ivanhoe Mines, which developed the Oyu Tolgoi copper mine in Mongolia, has agreed to invest $50m, according to people familiar with the matter. Ivanhoe is now controlled by Rio Tinto, the Anglo-Australian group.

Mr Rothschild, who earlier this month made a counter-proposal to the Bakries’ offer to buy back Bumi Plc’s Indonesian mining assets, was finalising commitments from investors for $270m in equity funding, they added.

He told the investment bank advising the board of Bumi Plc that he had the support of Mr Friedland as well as several other investors, the sources added, and intended to provide further details of his plans shortly.

Mr Rothschild’s consortium is likely to include Hashim Djojohadikusumo, the Indonesian businessman and brother of general-turned-politician Prabowo Subianto, according to a person familiar with the matter.

Mr Rothschild has garnered pledges of support from several existing institutional investors in the group, the person familiar with the matter added, and is in discussions with a large North American pension fund about backing his proposal.

Mr Friedland, Mr Rothschild and Bumi Plc declined to comment.

Since Mr Rothschild in 2011 struck a deal to reverse stakes in Indonesia coal assets into his London-listed cash shell, Bumi Plc has been dogged by corporate governance concerns and boardroom spats. The group’s share price has slumped from a high of £14 to 266.8p on Wednesday.

One person close to the group earlier this month characterised Mr Rothschild’s ideas as early-stage but said the board would consider them upon receiving more information.

Bumi Plc’s board has said it will await the outcome of an investigation – expected in two or three weeks – into potential financial irregularities at its Indonesian businesses before considering proposals from the Bakries and Mr Rothschild.

According to people familiar with the matter, Mr Rothschild supports the first part of the $1.4bn Bakrie proposal.

The family suggested swapping their 23.7 per cent stake in Bumi Plc for shares in Bumi Resources, the Indonesian miner in which the London group has a 29 per cent stake. The Bakries would then buy the London group’s remaining stake in Bumi Resources for $278m, severing ties between the two companies.

The Bakries also suggested buying Bumi Plc’s 85 per cent stake in Berau Coal, another Indonesian miner, for $950m in six months – though analysts say there remains uncertainty that the heavily indebted family could raise the necessary financing.

Mr Rothschild, however, envisages buying out the stakes in the London-listed company held by Samin Tan, Bumi’s chairman, who bought half the Bakries’ stake in Bumi Plc late last year, and another associate of the family, Rosan Roeslani, a Bumi Plc director.

Mr Friedland, considered one of most successful mining entrepreneurs of his generation, recently listed Ivanplats, an African-focused mining company, on the Toronto stock exchange. He is still the second largest shareholder in Ivanhoe, now called Turquoise Hill, which houses Rio’s $6bn Oyu Tolgoi copper project.

Separately, according to people familiar with the matter, the Takeover Panel is examining whether Bukit Mutiara, a company that owns 13 per cent of Bumi Plc and is affiliated with Mr Roeslani’s Recapital, is acting in concert with the Bakrie family. If that is the case, it could trigger a requirement for the Indonesian investors to bid for the London-listed company.

Mr Tan, who borrowed $1bn from Standard Chartered to finance his investment in Bumi Plc at almost £11 a share, is already deemed to be acting “in concert” with the Bakrie family following their deal last year.

The latter point will be an interesting twist if they are forced ti bid.