By Alex MacDonald
LONDON--Analysts welcomed Thursday a proposal by Indonesia's
powerful Bakrie family to buy all of Bumi's Indonesian coal assets,
but said they only envisioned the U.K.-listed coal miner being
interested in part of the proposal.
The Bakries have offered to pay cash and exchange their 23.8%
Bumi stake for the Indonesian coal assets they sold to Bumi in
2011, thereby ending relations with the miner after they frayed
this past year.
The deal would be worth around $1.2 billion according to
analysts and would bring an end to a tumultuous period for both
Bumi and the Bakrie family. Bumi's shares have fallen more than 70%
since the beginning of the year due in part to corporate governance
concerns and a probe that was launched recently into alleged
financial and other irregularities that especially focus on PT Bumi
Resources TBk (BUMI.JK), Indonesia's largest coal producer and a
jewel in the Bakrie family's crown.
The Bakrie family, through PT Bakrie & Brothers Tbk
(BNBR.JK) and Long Haul Holdings, has offered to cancel their 23.8%
stake in Bumi and pay an undisclosed amount in cash in exchange for
Bumi's 29.2% stake PT Bumi Resources.
The Bakries also proposed paying cash within the next six months
to buy Bumi's 84.7% stake in PT Berau Coal Energy TBk (BRAU.JK) and
asked that Nathaniel Rothschild and other founding shareholders
return 16.06 million in shares that had been issued to them as a
reward (for closing the original Bakrie deal) since the entire
investment was being unwound.
Analysts were largely in favor of the Bakrie Group's offer to
buy Bumi Resources but more skeptical about the Berau purchase.
The "Bakrie proposal to acquire stakes in Bumi and Berau [are]
hugely accretive" for Bumi, said mining analyst Richard Knights of
Liberum Capital in a note. While Bumi is likely to accept the Bumi
Resources offer because Bumi hasn't been able to impose its will on
the Indonesian miner, the Berau offer is "more controversial" given
that Berau has a strong production growth profile and Bumi owns
most of the company.
"To our minds the only reason for PLC to sell its stake in Berau
at this juncture would be perceptions over sovereign risk in
Indonesia," he added. Knights estimated the total Bakrie offer at
$1.2 billion, a 67% premium to Bumi's market capitalization on
Wednesday's close.
Barclays Capital estimated in a note that if Bumi were to accept
the Bakrie family's entire offer, it would become a cash shell
company once again with net cash of $1.294 billion and a
theoretical share price valuation of GBP4.83, up nearly 87% from
Bumi's closing share price of GBP2.59 Thursday.
But analysts at Barclays Capital said they don't expect the
transaction to close in its entirety. The bank expects Bumi to sell
Bumi Resources in order to resolve the "Bakrie overhang" but keep
85% of Berau, which would give it upside to a potential recovery in
coal prices. In the process it would pocket about $278 million for
selling its Bumi Resources stake.
The key question is how the debt-burdened Bakrie family plans to
fund the purchase. If the deal goes through as outlined by the
Bakries, the Bakries would need to pay about $280 million in cash
for the Bumi Resources stake and about $950 million for Berau. Some
analysts believe the Bakrie family wouldn't make an offer that they
felt they couldn't comfortably fund while other analysts say the
Bakries may struggle to fund such an offer given their other debt
commitments.
"Valuation aside, this looks like good news for Bumi PLC, in our
view," Mining analyst Cailey Barker of Numis Securities said in a
note. "Losing its main assets would be a disappointment but given
the soggy coal markets and dark cloud surrounding the company this
might be a good way to move on" and get some cash in the process,
he added.
Bumi's shares closed Thursday up 39% or 73 pence at 259 pence a
share, but are down 71% since the beginning of the year.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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