Bloomberg News

Rothschild Plots Ouster of Bumi Board That ‘Failed’ Holders

December 13, 2012

Nathaniel Rothschild

Nathaniel "Nat" Philip Vic Rothschild, founder of Vallar Plc. Source: Finsbury Ltd. via Bloomberg

Nathaniel Rothschild, scion of a centuries-old banking dynasty, said he may seek to remove the board of the coal venture he founded with Indonesia’s Bakrie family in the coming weeks because it has failed shareholders.

London-listed Bumi Plc (BUMI) lacks a viable plan to sever ties with the Bakries and their “acolytes who will remain behind in even greater voting control of Bumi Plc,” the financier said in an e-mailed statement. Bumi said yesterday it’s working to cut its association with the family and sell a 29 percent interest in Jakarta-based PT Bumi Resources “as soon as practical.”

Rothschild and the Bakrie Group, a palm oil-to-property empire, bundled stakes in Indonesian coal producers Bumi Resources (BUMI) and PT Berau Coal Energy in a $3 billion transaction two years ago. Boardroom infighting that led to Rothschild and Co-Chairman Indra Bakrie resigning from the company and investigations in London and Indonesia into possible financial anomalies have prompted moves by both to unwind the deal.

Bumi Plc’s “board needs to be removed as soon as possible, to safeguard investor interests and prevent further value destruction taking place at Bumi Resources and Berau,” Rothschild said. “Unless the board dramatically alters course, this is exactly what we shall be doing in the weeks ahead.”

New CEO

Rothschild has made repeated demands for Chairman Samin Tan, owner of about 23.8 percent, and Rosan Roeslani, a director who indirectly controls about 13 percent of Bumi, to resign. The board “has yet again failed to do the right thing for its shareholders,” Rothschild said.

Bumi yesterday promoted Nick von Schirnding, head of communications and investor relations, to chief executive officer effective Dec. 31 after current CEO Nalin Rathod told the board he planned to step down. Rathod, who’s also president director of PT Bakrie & Brothers, was appointed to the role in March. He will remain a non-executive director.

“We need to put an end to the shareholder infighting that has plagued the company for the last year,” Von Schirnding said yesterday in an interview. “I believe our shareholders deserve better. We need to move on.”

The Bakries said they welcome the statement from Bumi and see it as a step toward completing their proposed exit from the company. They own 23.8 percent of the stock.

Shares Slump

“We would like to reiterate that we are acutely conscious that the creation of Bumi Plc has been a major disappointment to shareholders, not least ourselves,” Bakrie unit Long Haul Holdings Ltd. said in an e-mailed statement. The group repeated a demand that Rothschild and other founders give up the 16 million bonus shares they received as a success fee.

Bumi dropped 0.9 percent to 268.4 pence by 2:29 p.m. in London. The stock has slumped 70 percent this year, valuing the company at 638 million pounds ($1 billion).

Shares in Bumi Resources gained 4.9 percent in Jakarta trading today, while Berau Coal was unchanged.

“It is another positive and ‘cleansing step’, particularly the appointment of Nick von Schirnding,” said David Butler and Ian Rossouw, London-based analysts at Barclays Capital. “It would also seem the company is moving forward with selling out of its interest in PT Bumi Resources, which could also potentially remove the Bakries from the register.”

Macfarlanes Probe

Bumi has received a near-final version of a report by law firm Macfarlanes LLP after a probe that began in September into potential financial “irregularities” at some of its Indonesian operations.

Bumi “is evaluating all legal and commercial options available to it and has been engaging actively with U.K. regulators and will continue to do so as appropriate,” it said yesterday. Its own investigation has discovered that information linked to the probe was “obtained illegally by e-mail hacking,” Bumi said.

It’s unlikely there will be any writedowns as a result of the probe, Bumi said. Still, there will be a “significant” year-end accounting adjustment to the value of its holding in Berau Coal.

Bumi announced Sept. 24 an inquiry into “potential financial and other irregularities” at its Indonesian operations, Bumi Resources and PT Berau.

The Bakrie Group said this week some documents used to justify the investigation were stolen or accessed by hacking.

‘Misleading Impression’

“Some of these documents appear then to have been ‘doctored’ to give a purposely misleading impression of a number of business transactions at Bumi Resources,” Chris Fong, a Bakrie Group spokesman, said Dec. 10. The Bakries plan to submit a report to U.K. police and regulatory authorities, while Indonesian police are probing the hacking complaints, Fong said.

Rothschild, 41, whose ancestor helped bankroll Britain’s war against Napoleonic France, has described the allegations as a “desperate attempt to divert the inquiry” by the Bakries and Chairman Samin Tan.

“If there were any issue that the board had a concern about in terms of the investigation, clearly Samin Tan would not be where he is,” Von Schirnding said. “The board is very supportive and comfortable with his position.”

Rothschild today called on Von Schirnding to make the full Macfarlanes report available “as soon as possible” so investors can make their own judgments on Tan.

The Bakries offered to buy Bumi Plc’s assets, holdings in Berau and Bumi Resources, in a $1.2 billion proposal to help end “irreconcilable differences” with Rothschild and the other founders, according to a letter containing the Oct. 10 approach. Bumi yesterday said it has no intention of recommending the sale of its Berau stake under the terms proposed by the Bakries.

Shareholder Support

Rothschild said this week his proposal has the support from the top five institutional shareholders and commitments totaling $342.5 million, including $75 million of his own funds.

Abu Dhabi Investment Council, Schroders Investment Management Ltd., Standard Life Investments, Taube Hodson Stonex LLP and Artemis Investment Management LLP all back Rothschild’s proposal to restructure the group, bringing total support to 28 percent of the voting rights of Bumi, according to Rothschild.

Bakrie Group’s Fong said Dec. 11 the group was “skeptical that Mr. Rothschild really had secured the support he claimed to have.” Rothschild’s proposal requires current shareholders PT Borneo Lumbung Energi and Metal and PT Bukit Mutiara to sell their holdings in the London-listed group, Bumi said yesterday.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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