Rothschild Gains Support From 11 Investors for Bumi Counterproposal

By Alex MacDonald

LONDON--The co-founder and former director of U.K.-listed Bumi PLC (BUMI.LN) said Monday that 11 investors, including Bumi's five largest independent shareholders, have backed an alternative proposal to the powerful Indonesian Bakrie family that would allow the company to continue operating as an Indonesian coal miner.

Nathaniel Rothschild said the 11 investors constitute a large enough shareholder base to block any proposal from the Bakrie family if it were put to a vote, a move aimed at pushing Bumi's board to favor Mr. Rothschild's alternative proposal over the family's proposal.

Bumi's shareholders, including the Bakrie family, agree that relations should be severed between the company and the family, although they are split on the best way to remove the family from the company after a board-room rift over corporate governance issues and the launch of an independent probe into financial irregularities caused the company's share price to plummet more than 80% since last year's high.

The Bakrie proposal envisions canceling the family's shareholding in Bumi and paying $1.2 billion in return for all of Bumi's Indonesian coal assets.

Mr. Rothschild's proposal on the other hand envisions removing not only the Bakrie family but also two major shareholders who are board members and have close ties to the family. The move is aimed at making sure that the family is unable to exert any influence over the board in the future.

In the alternative proposal, Bumi would continue to hold its 85% stake in Indonesian coal mining company PT Berau Coal Energy TBk (BERAU.JK) rather than sell it the Bakrie family.

Mr. Rothschild said that he has received backing from Bumi's five largest independent institutional shareholders: Abu Dhabi Investment Council, Schroders Investment Management Ltd., Standard Life Investments, Taube Hodson Stonex LLP, and Artemis Investment Management LLP. He has also received commitments from mining entrepreneur Robert Friedland and Hashim Djojohadikusumo, the brother of Indonesian presidential front-runner and general-turned-businessman Prabowo Subianto, to participate in the alternative proposal.

"In my letter to the Board [sent Friday], I attached nonbinding letters of support from these investors, which together with my own commitment of $75 million represents a total of $342.5 million to be made available in the form of new equity at Bumi," he said.

"My understanding is that the thresholds required by the Bakries to see their proposal succeed cannot now be reached," he added.

The capital raised through the Bumi equity issue would be used in conjunction with other Bumi funds to buy out chairman Samin Tan and director Rosan Perkasa Roeslani, two large Bumi shareholders who have close ties to the Bakrie family.

The counteroffer also proposes Bumi accept the Bakries' proposal to buy back Bumi's 29.2% stake in Bumi Resources in exchange for $278 million in cash, plus the Bakrie family's exit from its Bumi PLC stake, only on the condition that Mr. Tan and Mr. Roeslani agree to exit from the company's shareholding and board. Mr. Rothschild and the investors would then inject cash into Bumi PLC to buy out Mr. Tan and Mr. Roeslani at current share prices.

Write to Alex MacDonald at [e-mail]

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