Bumi needs new name like No Resources Co.

In a quiet move that only limited shareholders (most likely controlling ones) aware of, PT Bumi Resources Tbk offloaded two of its key assets PT Kaltim Prima Coal and PT Arutmin Indonesia to PT Borneo Lumbung Energi for US$3.2 billion.

Those who got the early information or involved in the transaction had taken huge gain out of the transaction. Look at the BUMI's share price prior to the transaction (graph from Bumiresources.com). What actually is the benefit of this transaction for public shareholders? Why Bumi decided to sell KPC and Arutmin to Borneo and not other investors? Who are the beneficiary owners of this transaction? What's left? Who got the money and how much? Did they ever tell or ask approval of public investors about the material transaction? Did they tell Bapepam (Indonesia's SEC)?

All of us knew after the fact that Bumi had appointed two securities firms, PT Danatama Makmur and PT JP Morgan Securities Indonesia, as advisors for the transaction. We also knew after the deal had been done if that's in line with the company's business strategy to become Indonesia's best performing energy and natural resources company.

Surprisingly market authorities not just did nothing to investigate what's going on but welcome the transaction even before they do their homework. "So many questions are left unanswered, but authorities seems to put a blind eye. The transacation has clearly screwed up minority investors," said one analyst.

Without KPC and Arutmin, Bumi Resources is a shell company without assets. That's why I suggest the company to consider a new name like PT No Resources Tbk. A friend suggest the name of PT Shell Resources Tbk, but I said the real energy giant Shell will surely take legal action on that.

Ok, let's go back to the transaction. Bumi Resources got US$3.2 billion. What to do?

- Pay debts to PT Energi Mega Persada Tbk for US$500 million. And then merger in July with Energi Mega. Imagine how Energi Mega's public investors or minority investors. They'll be screwed up again.

- Pay out the bonds early at US$600 million.

- Embarks on US$3 billion coal-to-liquid project with SASOL among others. But SASOL denied it straight. So forget about it for a while. The CTL project is a far away dream.

- Investing in new businesses such as bio-mass, upgraded brown coal, briquettes, bio-diesel, and power plants. But all of these are long-term plans.

What the readers said about the deal?

An old friend wrote this two days ago:

It would seem to be a handy tool to allow the Bakries's to leverage the company up to the hilt. If you cannot have a standard bank to suck up investors money to recycle in your business, buy yourself in to a "so called" investment bank. I can only conjecture that this is a sham transaction merely to leverage the coal assets to the hilt whilst prices are high.

I would guess that Marubeni have agreed to a certain offtake agreement for X years to support the loan and at the end of the day it is Bakrie still with controlling shareholding.With the ongoing unrest amongst foreign resource companies the Bumi policy of getting foreign assets at bargain prices at moments of unrest could be unfolding again. I can only guess the coal to liquids is a very obvious red herring.

And this...

I thing coal to liquid is rediculous plan of Bumi Resources. If They want to leap its tentacles to coal to liquid, sol why did they sell two 'diamons'????Are they sick?

Another friend...

It seems like a financial engineering done by Bumi Resources. Along with huge profit from the sale, Bakrie Family who owns Bumi Resources has dreamed to enlarge the company as well as Australian BHP Billiton and Xstrata.I am sure that Borneo or Samin Tan is just a middle man who is willing to sell KPC and Arutmin to Bumi and chip in the assets into Energi Mega Persada.Bumi will offer a share swap for Energi Mega's shareholders to support the giant making of integrated energy company, PT Bumi Energi.

Or this one from a real 'old' friend:

Samin Tan's comments this week that "we will not sell Bumi again for the time being" shows that Renaissance has not only bought the two Bumi mines through Borneo Lumbung Energi but is also calling the shots in Bumi, ergo, is VERY close to the Bakries, a persistent rumour that Bakrie spokesmen have consistently denied to local media several times.

This is highly significant. WHY? Because it puts the Bakrie's right back in the middle of all the action through Renaissance and its success with the PPA.

Assuming that Beckkett loses the Singapore action, and Edwin hooked up with Tan, Renaissance and the Bakries would still have 20% of Indonesia's biggest coal producer with the Adaro mine, 40% of which was bought in Deutsche's firesale of the assets! Renaissance is well in with the PPA which holds all the unsold IBRA assets pledged to the government by indebted tycoons.

Renaissance can broker funds into deals that many lenders would not touch and allow Bakrie free rein with his supreme lobbying ability in the corridors of power and with the Group's ability to leverage big deals with litle capital. Also with Renaissance up front, but not obviously linked, the Bakrie Group need not fear any of the stigma attached to them for being, at one time, one of Indonesia's biggest indebted conglomerates.

These are smart, smart guys (Tan and the Bakries) hence my suggested reemergence of the Indonesian version of the Asia tigers (albeit formerly applied to Asian tiger economies of old). Acting together they have the Midas Touch. Finally, note the resurrection of the pribumis, not the Chinese. Indonesian resources owned and operated by pribumi Indonesians? Amen, I'll drink to that.!

As for me,

I need to meet Bumi Resources management, advisors, analysts, buyers, and securities exchange authorities to get the answer of all my stupid questions. Appreciated all the comments, and would love to have all of you answer some of the questions.

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