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Bakrie to beat Rothschild - the outcome of this meeting significant


Winners Again, Bakries Prevail in Bumi Dispute

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By ERIC BELLMAN

JAKARTA, Indonesia—Indonesia's billionaire Bakrie family is known for rarely backing down from or losing a challenge. Now it appears to be getting what it wants yet again.

On Monday the directors of London-listed Bumi BUMI.LN -4.59% PLC, one of the world's largest coal-mining companies, are expected to approve changes in the board and management along the lines of what the Bakrie family demanded last month following a dispute with Bumi's main European investor, financier Nat Rothschild.

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Reuters

Samin Tan, an Indonesian major shareholder of Bumi

Under the deal, the Bakries would recede somewhat from center stage at Bumi, with one of the family's brothers, Indra Bakrie, stepping down as chairman. He would be succeeded by Indonesian coal magnate Samin Tan, and Mr. Rothschild would relinquish his position as co-chairman.

While the Bakries and other Indonesian investors backed off demands that Mr. Rothschild leave the board altogether and that the restructuring be decided through a shareholder meeting, they expect to get almost everything else they requested, including a new chief executive and a new chief financial officer for Bumi.

Even if the changes are approved, it remains to be seen whether the new structure will satisfy shareholders. The stock has plunged 18% since Indonesian investors called for the changes last month, after Mr. Rothschild criticized the corporate governance of Bumi's Indonesian partners.

Yet if the changes go through, and gain shareholder support, it could be an important turning point for the Bakries. It also could be a boost for Indonesia, which has suffered from concerns that some of its companies lack transparency.

Such concerns have made some potential investors skeptical of the Bakrie group businesses, even refusing to buy or cover stocks in its entities. The family is among the most important business clans in Indonesia as the country becomes one of Asia's newest investment darlings. Yet investors speak of a "Bakrie discount," meaning company properties are valued more poorly than similar companies because some investors don't trust the family's disclosures.

The emergence of Mr. Tan as a successor to Mr. Bakrie could help, analysts say. He is expected to protect his interest fiercely after investing $1 billion last year for a 23% stake in Bumi. A former accountant who developed what is now Indonesia's largest coking coal mine, Mr. Tan's fortunes skyrocketed in the past five years, making him one of Indonesia's newest billionaires.

The Bakrie family is happy to cede some control to Mr. Tan and expects the new board and management structure to calm the concerns of investors, according to people familiar with their thinking. A representative for the Bakrie family declined to comment.

The arrangement also could help boost the Bakries' standing in international business circles. That was the original intention of the London listing. After the family listed its Indonesian coal assets through a reverse takeover with Mr. Rothschild last year, the Bakries held a celebration in Jakarta with the theme, "Putting Indonesia on the World Map."

"We are taking the Bakrie brand global because we want Indonesia to stand out in the international market and we have the world-class assets and competitiveness to do so," Nirwan Bakrie, chairman of the Bakrie Group, said in an interview last month.

Started in 1942 by Achmad Bakrie, the family business started as a trading company and expanded into steel-pipe manufacturing. It later moved into plantations, telecommunications, banking and other businesses, though it lost many of them in the Asian financial crisis.

Under the leadership of his three sons, Aburizal, Nirwan and Indra, the group clawed its way back to encompass some of Indonesia's biggest companies in property, infrastructure, and other sectors. Its PT Visi Media Asia has one of the highest-rated news broadcasts in the country, while PT Bakrieland Development is developing a huge tract of land in downtown Jakarta with a popular mall. It has a Bakrie University campus and a 50-story onyx Bakrie Tower, home of its Jakarta-listed holding company PT Bakrie & Brothers. The family also owns soccer clubs.

Polls consider eldest son Aburizal Bakrie, who is head of one of the country's biggest political parties, a leading candidate to become Indonesia's next president in 2014. While he no longer is directly involved with the management of group companies, analysts say the political clout he brings helps the group get things done.

But the family's biggest assets are in coal. Mines controlled by Bakrie companies produced close to 70 million tons of coal last year with more than 10 billion tons of resources. Although Bakrie family wealth is estimated to be in the billions of dollars, analysts say it is hard to measure due to the complexity of the family holdings.

"This is not your typical family business," said Lanang Trihardian, senior investment analyst Syailendra Capital, a $400 million fund. "Despite all the noise about them, nobody really knows how the companies are run."

The family's mining assets were wrapped into Bumi in last year's reverse takeover and then listed on the London Stock Exchange. The Bakrie family wound up with a 47% stake but only 30% of the voting shares. The Bakries later sold half of their position to Mr. Tan's company PT Borneo Lumbung Energi & Metal to pay off debt.

If having Mr. Tan at the helm of Bumi eases investor concern about the company's governance, it could send Bumi's shares higher, analysts say. The Bakrie family's decision to join with Mr. Rothschild and other international investors in London was driven partly by a desire to reduce governance concerns. The hope was that by listing Bakrie mines in London and giving up some management control it could get a higher valuation for its coal.

"We have a unique opportunity to raise the bar in the development of this company," Mr. Rothschild said last year. "Our London domicile will not only give us access to competitive capital markets but it will also provide us with increased transparency to our mining business."

Two months later, though, Mr. Rothschild questioned his Indonesian partners' corporate governance in a letter leaked to the media. Then last month, Indonesian investors moved to oust Mr. Rothschild and shuffle the board.

Mr. Tan now says he wants to restructure and streamline the structure of Bumi's holdings by combining its assets and businesses—a move that could further cheer investors.
—Edhi Pranasidhi and Linda Silaen contributed to this article.