Tata Power pays USD1.3 billion for 30% KPC-Arutmin
India's Tata Power agreed to pay USD1.3 billion for 30% shares of two coal mining subsidiaries of PT Bumi Resources Tbk---PT Kaltim Prima Coal & PT Arutmin Indonesia. Senior Vice President Investor Relations of Bumi Resources Mr. Dileep Srivastava confirmed the divestment last night. "The USD1.3 billion is inclusive the working capital. It shows Indonesia's attractiveness to the world's investors," he said.
The price is clearly lower than the previous claims that Tata would pay at USD1.6 billion, but for sure it's higher than analysts prediction at USD1 billion. What we need to know is the terms and conditions of Tata's offer.
"The price could be misleading. That's why we have to look deeper into the terms and conditions of the deal," an investment banker said.
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The price is clearly lower than the previous claims that Tata would pay at USD1.6 billion, but for sure it's higher than analysts prediction at USD1 billion. What we need to know is the terms and conditions of Tata's offer.
"The price could be misleading. That's why we have to look deeper into the terms and conditions of the deal," an investment banker said.
Labels: Arutmin, Bumi Resources, KPC
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posted by yosef at 10:27 AM
8 Comments:
Believe it when Tata announces it. Who will run KPC, current management hopeless.
Poor Tata - wait until they discover Bumi has not disclosed the poison pill ......
KPC and Arutmin already drained of life blood and remaining shell inflated with only hot air. when tata expensive penny finally drops, I hope they can sue the professional companys involved in doing all the due diligence.
I agree with poster 1 good management got rid of, now standards in all department falling very quick.
Laugh..Poor Tata indeed, it will cost them that much again to fund re-pair and replace all the capitial equipment that has been run down past point of new return, not mention to recruit somewhere near middle of the road management unlike the bottom feeders and ol boys club currently in charge..You have just been scammed! They just bought (if true) a company with no ethics or future unless they can rid the cancer within.
Well well it's much lower than what have been indicated previously. the transaction price is below the Bumi's current share price of 1,320. Share price will likely to fall on Monday unless the owner supported the share price. US$1.1b in EV translate to about USS2.67b in equity value or Rp1,250/share. Happy selling.
US$1,3 billion is lower than what was publised on the Economic Times India.
So it seems that US$1,6 billion just to jack up Bumi shares price, while...With that number, Merrill Lynch has adjusted its recommendation from sell to buy...
From a once disgruntled, now very happy because ex-KPC employee.
So it’s finally announced – Tata has won the lottery and delayed for a bit longer Bumi’s inevitable move to financial and management collapse. Many cannot wait to see what terms of management involvement in KPC Tata has won or demanded. Assuming Tata are not fools then they will have demanded management control of KPC, particularly its cash flow, “at last” I hear all the KPC contractors saying, and most importantly demand management control of KPC’s contracts. If not, profit and cash will continue to be sucked out the back door to enrich the cronies’ coffers. Tata will not even see a marginal return on their investment.
Challenges for the new 30% shareholders will be to:
(1) Address East Kalimantan Government moves to get control of 51% of the mine following a questionable divestment process involving Bumi and the then local government that will not stand up to scrutiny by the international court of justice.
(2) Manage a possible “goodwill payment” by KPC’s militant and rampant unions. After holding a gun to KPC management's head last year, through a general strike, Bumi offered unions about Rp 70 billion for the proposed 100% sale. Their loyal employees who did not go on strike were to get nothing. It will be logical in union’s view that they must now be given 30% of that original amount as “goodwill” (what a term to use. Needless to say, a healthy percentage of that payment goes direct to union accounts not to their members. After all they have learned quickly from Bumi management how to handle cash flow.
(3) Address the debilitating sleeper effect of the mass exodus in recent times of KPC’s international executive management team in the face of incompetent, or dare use that “K” word, corporate management.
(4) Secure a return on their investment by reversing the many non-competitive, non-performing and/or financially negative contracts awarded to Bakrie companies or cronies. I thought in most countries including Indonesia that it was against the law for a public companies to siphon off profits to private interests through increasing its operating costs, Don’t directors risk jail for not acting in the best interest of all shareholders?
Specifically, will Tata with its $1 billion + investment be able to do anything about:
(1) The KPC contract to mine its satellite deposit at Bengalon operated by a fully-owned Bumi Resources subsidiary PT Darma Henwa which, although currently economically uncompetitive because of the sweetheart deal for Darma Henwa, continues to suck KPC’s profits out the back door into the cronies’ coffers? Little wonder why KPC's international executive general manager of the Bengalon project recently resigned in the face of the rejection by Bumi directors of his professional advice about more cost efficient management of Bengalon!
(2). Reverse a Bumi director’s decision which recently awarded to a crony company KPC single largest, mother of all, mining support services contracts, that is, supply of fuel to the world’s largest mining fleet for many years, at a price that was well above the price that could be obtained through other sources by KPC management. A difference of even a cent per liter in fuel costs makes a difference of millions of dollars of profit/loss per annum. Nice easy money if you can get a piece of the action! The list of contract cash siphons and contracts for cronies at KPC goes on.
But then again Tata might regard all this as just ‘country risk’ in Indonesia and is prepared to live with it for strategic business reasons. OK but what about the public shareholders not to mention the laws of Indonesia? Somebody should ask them!
Selamat datang to KPC Tata. Good luck and you will need it.
Wow..this is a good news no? Hopefully the Bakrie's will use the money for Newmont. Congrats Tata and Bakrie..well done!!! Prove the skeptics here they are wrong. You will prevail Baby...!!
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