Borneo sees divorce in Bumi Plc's Indonesian partners

JAKARTA Thu Oct 25, 2012 3:20am EDT

Exterior view of the office building that houses Bumi Plc in London September 25, 2012. Picture taken September 25, 2012. REUTERS/Neil Hall

Exterior view of the office building that houses Bumi Plc in London September 25, 2012. Picture taken September 25, 2012.

Credit: Reuters/Neil Hall

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JAKARTA (Reuters) - Indonesia's Bakrie family has agreed in principle to pay compensation to coal tycoon Samin Tan for his soured $1 billion investment in their joint stake in Bumi Plc BUMIP.L, meaning a "divorce" in the partnership, executives at Tan's firm said on Thursday.

The move is the latest blow for troubled Bumi Plc, which aimed to be the world's biggest thermal coal exporter but may be left as a shell holding company with no operating assets if both Indonesian partners pull out.

There were no details given on the size of the potential compensation. Alexander Ramlie, the CEO of Tan's coking coal miner PT Borneo Lumbung Energi (BORN.JK) that holds the Bumi stake, said he hopes the investment will be fully compensated.

"We are confident that we will get our investment in Bumi Plc back," Ramlie told a news conference in Jakarta.

Tan, via Borneo, pulled the politically connected Bakrie Group from the brink of default when he invested $1 billion in London-listed miner Bumi Plc in January, only to see the value of the investment crumble.

After months of tensions between leading shareholders of Bumi Plc, the Bakrie Group earlier this month surprised the Bumi board by proposing a $1.38 billion deal to buy back the coal assets and dismantle the company they created with financier Nat Rothschild.

Rothschild disagreed with the proposal and has already stepped down from the board, attacking his partners for considering unraveling the venture.

The Bumi proposal would allow the Indonesian family to exit its Bumi Plc stake and take back the firm's operating assets, which are among the richest coal mines in Indonesia, the world's top thermal coal exporting nation. The Bakries and Tan each own half of a joint 47.6 percent in Bumi Plc.

"The question is how Bakrie would pay Borneo? This will only happen if there's another M&A story on the way ... because people keep doubting Bakrie could raise the money to buy back Bumi," said Jemmy Paul, head of equities at Jakarta-based Sucorinvest Asset Management.

The Bakries are already in talks to sell a pipe making unit for $100 million and a stake in coal firm PT Fajar Bumi Sakti for $200 million, sources say.

DIVORCE

Ramlie said the Bakries had agreed in principle to compensate Borneo for its stake in Bumi Plc via the family's investment vehicle Long Haul Holding Ltd.

"It's a divorce in Bumi Plc," said Borneo director Ken Allan.

Reuters reported last month that the Bumi Plc tensions could lead to a split between Tan and the Bakries.

Bumi Plc could not immediately be reached for comment.

Borneo's stock price was steady after the announcement, having earlier risen 3.4 percent, while the Bakries' Jakarta-listed coal miner Bumi Resources also held ground, having dropped 1.5 percent earlier on Thursday.

The shareholder disputes, worries over debt and falling coal prices have battered Bumi Plc and Bumi Resources shares this year, and have also dragged down Borneo's stock in a Jakarta market .JKSE that has gained 13 percent this year.

(Additional reporting by Andjarsari Paramaditha; Writing by Neil Chatterjee; Editing by Richard Pullin)

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