Bukit Asam H1, below target

State-owned coal producer PT Tambang Batubara Bukit Asam (PTBA) Tbk reported lower sales than its projection in the first half 2009 on weak demand. 

Bisnis Indonesia reported today that while the company recorded higher sales than the same period last year, it is below the projected 10%-15% growth. But the company was optimistic it could reach its whole year target. Bukit Asam reportedly sold 5.85 million tons of coal in H1 2009, of which 63% to domestic and 37% to export markets.

Bukit Asam planned to boost its sales to 15.5 million tons this year, increased 19% from last year's 13 million tons. The company and Rajawali Corp are partners in PT International Prima Coal (IPC). Bukit Asam spent US$17.85 million to acquire IPC shares last year.

According to the newspaper, Bukit Asam also plans to acquire greenfield coal mines this year, reportedly bigger than IPC.

Bukit Asam stock price surged from Rp4150 in October 2008 to Rp13,600 in June 10, 2009. Since then the stock retreated to as low as Rp10300 late last month, but recovered to close at Rp11400 last Friday.

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Farallon-Rajawali to acquire Bumi assets?

PT Bumi Resources Tbk is reportedly engaged in a negotiation with a new alliance of a global fund manager & Indonesian conglomerate to replace PT Borneo Lumbung Energi as the buyer of its assets (PT Kaltim Prima Coal, PT Arutmin Indonesia, and PT Indocoal) with financial back-up from Credit Suisse.

Rumors in the investment bankers circle said Farallon Capital is reportedly the global fund manager, while the Indonesian group is Rajawali Corporation. Both companies---allied in the acquisition of Cemex SA shares at PT Semen Gresik---denied the rumor.
"They are working together to try to do that. But I don't think they will succeed...," an investment banker in Singapore said. He said JP Morgan, which also involved in the Cemex deal, approached Farallon-Rajawali. JP Morgan, an advisor for Bumi in the collapsed US$3.2 billion deal with Borneo, also denied the negotiation and rumor of the close relationship between JP Morgan and Farallon Capital.
JP Morgan helped Willow Finance (a vehicle owned by Bakrie family) in the issuance of US$205 million facility linked with Willow's shares in Bumi, exchangeable at Rp500/share. Farallon was the key financier for Bakrie family when they bought KPC from Rio Tinto through Merrill Lynch. Farallon also lent huge amount of money to Berau Coal investors when they bought the company from Astra.
Why doubt?
"It's too big even for them. They also don't have the operational expertise in coal mines. Besides, they already bussy with very ambitious goals for the company they just bought recently," he said.
Are they interested in buying minority stakes?
"No I doubt. These guys are only interested in if they can take the whole thing."
So, I other friends-analyst about Rajawali's chance.
"Where you got the information from? Let me check. But from what I read in the newspaper, with EBITDA below US$300 million in the first half, the assets would have low price. I don't think Bumi would proceed with the divestment."
Well, the poor EBITDA news is considered by some as the door to wage a hostile takeover. (By whom?)
What if Bumi cut the price?
"I think Bumi won't do that because it will send negative sentiment to the company's shares. Even if they do that Borneo has the biggest chance because the deadline for their the sales and purchase agreement (SPA) actually by the end of this month."
How serious? Could it be just part of efforts to boost market sentiment ahead of JSX's plan to lift the suspension on Bumi shares trading? Or to save the hedge funds who bought Willow Finance EB?
But, hostile takeover?
"I think, the Bakrie family is vulnerable to investors. If Bumi shares plunge, it would make sense for Willow bondholders to exchange into shares...sensing that, I wouldn't be surprised if the family is becoming defensive. I know some people out there would resort to hostile measures," said a senior analyst.
Tired or bored with the issue, go to Porong, Sidoarjo, enjoy the hot mud treatment there! They have new entertainment there...mud wrestling!

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Bentoel & Sampoerna boost cigarette output

Two listed cigarette producers, PT Bentoel & PT HM Sampoerna, are installing new machineries to boost output with Rp300 billion and Rp2.8 trillion investment respectively.

Bentoel, a company controlled by Rajawali Corporation, is allocating Rp300 billion to modernize its machineries in Malang, East Java. Meanwhile, HM Sampoerna, controlled by Philip Morris, secured expansion license from Investment Coordinating Board (BKPM) to build Rp2.8 trillion plant in Karawang, West Java province.
Prior to the acquisition of Sampoerna Family's shares in HM Sampoerna, Philip Morris was engaged in production cooperation with Bentoel. But both parties terminated the cooperation that cost Bentoel a massive layoff in 2005.
"But we're modernizing our plants with new machineries as our sales grew by 60% in the first half," Darjoto Setiawan, managing director of Rajawali Corporation said yesterday.
With the expansion, HM Sampoerna would widen its gap with PT Gudang Garam Tbk. HM Sampoerna for the first time took the number one spot as the largest cigarette producer this year from Gudang Garam.
These new expansions reflects increasing demand both in domestic and export market. This is clearly a bad news for anti-smoking movement, but good news for government and the state budget even though the anti-smoking movement argues that the cost for the state in the longer run actually higher from increasing healthcare costs.

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Cemex-Rajawali deal signed

Rajawali Corporation and Indonesia government finally signed shareholders agreement this morning to mark the formal approval of Rajawali's acquisition of 24.9% shares of PT Semen Gresik Tbk previously owned by Cemex SA.

People close to the deal said crossing of shares would be conducted on Wednesday.
As the new shareholder, Rajawali is eligible to have three representatives in the management, in the position of deputy president commissioner, deputy president director, and director. It's interesting to see who will represent Rajawali in these positions.

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Cemex-Rajawali deal

After almost three weeks of delay, Cemex SA and Rajawali Corporation (through Blue Valley, a SPV) would likely to close the US$335 million deal on PT Semen Gresik Tbk shares next Wednesday as the shareholders agreement is scheduled to be signed 3PM today.

"If we could sign the shareholders agreement as scheduled at 3PM at the Ministry of State Owned Enterprises office today, then we could close the deal next Wednesday," people close to the transaction said.
Under the shareholders agreement, Rajawali is reportedly agree to one share one vote and no rights issue after it control 25% shares of Semen Gresik.
Besides, Cemex also agree to drop the arbitrary suit against Indonesia government. Cemex and government will sign the settlement agreement tonight.

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Cemex to drop arbitrary

Cemex SA has agreed to drop the arbitrary suit against Indonesia government as part of the deal to sell its 25.5% shares in PT Semen Gresik Tbk to Rajawali Corporation.

People close to the deal said Cemex will submit the agreement letter to Indonesia government this week to pave the way for a closing of US$335 million deal with Rajawali.
"Almost 95% of legal process has been completed. Only one or two items left to be settled immediately. We hope by the end of this week we could close the deal," he said.
The deal has been dragged for few weeks on some critical issues, including the arbitrary suit filed by Cemex SA to ICSID in early 2004 on dispute over further divestment of PT Semen Gresik Tbk, the largest cement producer in Indonesia.

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Rajawali failed to close the deal, one week extension needed!

Rajawali Corporation failed to close the US$330 million deal to acquire 24.9% shares of PT Semen Gresik Tbk from Cemex SA this afternoon as no formal approval given by government.

"We've asked one week extension to Cemex SA. We hope we could get government approval next week," said Darjoto, managing director of Rajawali Corporation few hours ago.
The closing deadline for the deal was supposedly this afternoon, but Rajawali didn't get letter of approval from Ministry of State-Owned Enterprises (MSOE), the majority owner of Semen Gresik.
Actually, Rajawali could close the deal without formal government approval (MSOE Sugiharto had given verbal approval this week), but that would put the company in an ackward situation. On the other hand, without formal letter from government, Cemex will unlikely to drop the arbitrary suit against government.

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Market Watch

Stock market is waiting the closing of two important deals scheduled today. First, the US$3.25 billion acquisition of PT Bumi Resources Tbk's subsidiaries (PT Kaltim Prima Coal and PT Arutmin Indonesia) by PT Borneo Lumbung Energi. Second, the US$330 million acquisition of Cemex SA's 24.9% shares in PT Semen Gresik Tbk by Rajawali Corporation. Updates will be available in this blog by afternoon.

Besides, PT CP Prima is about to announce the decision on its IPO amid rumors that it might drop the plan on weak market respond. Meanwhile minority shareholders of PT Tunas Baru Lampung Tbk had lost the battle to block the rights issue as 74% shareholders endorsed the plan to raise Rp400 billion that will dilute significantly their shares ownership. Sinarmas Sekuritas, a subsidiary of PT Sinar Mas Multiartha (sub-holding of Sinar Mas Group in financial business), could be a significant shareholder in Tunas Baru pursuant to the rights issue plan as the standby buyer.
Morning trading session at JSX seems pretty good with the composite index increased 29 points, triggered by Central Bank's plan to cut rates instead of raising it following The Fed's decision to raise the rate by 25 basis point yesterday. Rupiah gained in morning trading of weaker greenback as a result of the increasing Fed rate.

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Judgement Day for Cemex-Gresik saga

The clock is ticking down to final minute of the long dispute over state-owned enterprise PT Semen Gresik Tbk. Rajawali Corporation is expecting the blessing from state-owned enterprises ministry of its plan to acquire Cemex SA's 24.9% shares in the cement manufacturer. What if government don't want to give the blessing?

The worst case scenario is that government will not give the blessing for Rajawali to close the US$330 million deal that potentially put an end to arbitrary suit filed by Cemex SA toward Indonesian government looking for compensation at hundreds of millions of dollar.
Actually, Rajawali could still close the deal. But Rajawali would risk ongoing dispute with government in the future as an unwanted investor-partner. Cemex on the other end would keep playing the arbitrary card that put government at risk of losing the legal battle.
It's like another slap in the face of Sugiharto, the minister of SOEs. Yesterday, in a parliament hearing, minister of finance Sri Mulyani Indrawati knocked Sugiharto down on SOEs planned dividend payment for 2007 budget. Mulyani convincingly downsized Sugiharto's ambitious SOEs dividend payment arguing SOEs needs to use generated profits to expand.
Last year Semen Gresik booked net profit of Rp1 trillion (US$110 million) and projected 40% growth of net profit to Rp1.4 trillion this year.

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Titiek Soeharto off the screen tonight! Sugiharto surrendered!

Good news for those who protested to SCTV for having Titiek Soeharto (daughter of former president Soeharto) as the prime-time presenter for World Cup 2006 games. As reported by Detik.com few minutes ago, SCTV confirmed that Titiek will be off the screen tonight amid protest from spectators.

SCTV didn't confirm on a possible permanent off-the-screen of the former wife of general (ret) Prabowo Subianto. Detik.com did survey on dotcommers and the result is 85% football fans want Titiek completely out of the program. They feel annoyed with Titiek's sub-standard performance.
Meanwhile, this is completely nothing to do with Titiek politics and economics, state-owned enterprises minister Sugiharto finally lift his hands up on Cemex's plan to sell its 25.5% shares at PT Semen Gresik Tbk to Rajawali Corporation.
This is a good news for Rajawali and Cemex. I tried to tell football mania and asking their comments and they said: Who cares? Well, but Lin Che Wei (president director of Danareksa) wrote in Kompas today that with the decision of Cemex, one of the bridges to foreign investors is collapsed. "Really?", an annoyed journalist said. "Anyway, can FIFA move forward the Italy vs Ghana to, let say, 8 PM Indonesia Time?," he asked. "No, because it will make SCTV cancel their decision and Titiek will be on screen if FIFA do that."

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Cemex rejects Sugiharto again, go ahead with Rajawali

Cemex Asia Holding send a letter to Minister of SOEs Sugiharto today and reiterated its objections on the latter's appeal for more time to exercise the rights of first refusal in Cemex's divestment of 25.5% shares in PT Semen Gresik Tbk.

People close to the saga said Cemex make it clear to Sugiharto that it would go ahead with the plan to sell 24.9% shares of Semen Gresik to Rajawali Corporation at USD337 million. "For Cemex, the game is over," he said.
A cabinet meeting last week actually asked Sugiharto to accept Cemex's offer to drop the arbitrary suit as part of the deal with Rajawali. "Government could deal with Rajawali later on, let say to accommodate some interests in Semen Gresik, including from West Sumatra groups," a high-level officer attending the cabinet meeting said.
But Sugiharto insisted to take all the opportunities he has in hands to try to deal directly with Cemex. He sent the second letter to Cemex on Friday just after Cemex's rejection on the first letter. The answer is the same. Time's up!

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Cemex rejects government's proposal

Cemex Asia Holdings has decided to reject Indonesia government's proposal for an extension period of 60 days to exercise its first right of refusal or to acquire the cement giant's 25.5% shares in PT Semen Gresik Tbk.

"Cemex rejected the 60 days extension. So, Indonesia government should exercise its right to acquire Cemex shares in the time frame available, 30 days since Cemex sent the notification letter. Somehow, Indonesia government should learn something out of this saga," said people familiar with the issue.
Bisnis Indonesia reported on Saturday that SOE Minister Sugiharto had sent a letter to Cemex demanding an extension of 60 days to exercise the acquisition. Sugiharto claimed a consortium of state-owned enterprises would act on behalf of government to acquire the shares, just two weeks after Cemex signed a conditional sales and purchase agreement with Rajawali Corporation, a company led by tycoon Peter Sondakh. Rajawali agreed to pay US$337 million for Cemex's 24.9% shares of Semen Gresik.

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Gov't want to buy, Cemex rejects

Indonesia government had decided to exercise its rights to acquire Cemex SA's 25.53% shares in state-owned cement maker PT Semen Gresik Tbk through a consortium of SOEs, but Cemex is most likely reject the offer.


SOE Minister Sugiharto told the press after a meeting with coordinating minister for the economy Dr Boediono that government had sent the letter of intent to Cemex.
"But it's up to Cemex to decide," he said.
Bisnis Indonesia reported that Sugiharto asked Cemex to give two months time to exercise the right.
"The problem, legally according CSPA between government and Cemex in 1998, government can't transfer the right to buy. The legal opinion is that government has no legal basis to assign rights and to seek extension," source at the ministry said.
So, it's a matter of interpretation of the CSPA. Sugiharto (and Vice President Jusuf Kalla) argued that government could buy the shares outside the budget mechanism deploying SOEs.
SOEs like Jamsostek, Taspen, and Danareksa---all fund management companies would act on behalf of the government to buy after government decided to use its first right of refusal. This is not a surprise. Jamsostek led by Iwan Pontjowinoto (Sugiharto's colleague at Sharia Economy Society) claimed financing support for government to rescue the ailing flagship carrier Garuda Indonesia just days after Sugiharto openly said about the option to divest up to 49% shares of Garuda.
Minister of Finance Sri Mulyani Indrawati had turned down Sugiharto's proposal on Cemex arguing no state budget allocated but she said that she could understand if Sugiharto take another options.
But even if these SOEs would be allowed to buy, it's not easy to raise equity or to rely on their own funding. Bisnis Indonesia reported that Sugiharto have approached international lenders such as Macquarie Bank, UOB (Singapore), West LB (Germany), and Presidio Advisors (in partnership with PT Andalas Tuah Sakato, a company owned by West Sumatra administration). These companies claimed US$400 million funding in hands.
Cemex, reportedly, rejects the offer and only want to sell the shares to Indonesian company Rajawali Corporation owned by Peter Sondakh at US$337 million. Cemex and Rajawali had signed the conditional sales and purchase agreement (CSPA)to bring an end to long legal dispute with government.
So, the card is in Cemex's hands now. If the company reject Sugiharto's proposal and go ahead with the deal with Rajawali, I think Rajawali would feel the heat. But definitely it's also depend on how Rajawali deal with the government officers like Kalla and Sugiharto at the national level and local leaders in West Sumatra, East Java, and South Sulawesi---the locations of Semen Gresik's operations.

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Malaysia’s year of acquisitions!

I should say this year is Malaysia’s year in Indonesia’s investment, just like 2003 and 2004 for Singapore. A lot of acquisitions with totally different reaction from Indonesian.

Singapore investors were facing intense opposition and criticism, sometimes out of proportion nationalism sentiment during major acquisitions by Temasek on Indosat, Bank Danamon, and Bank International Indonesia (BII). That’s not the case with Malaysia’s acquisitions, at least in the last 12 months.
Last week, Santubong Investments BV, a wholly-owned subsidiary of Khazanah Nasional Berhad, completed its proposed acquisition of a 52.05% equity stake in PT Bank Lippo Tbk from Swissasia Global for approximately US$330 million.
Santubong is also planning to make a tender offer for the remaining shares in Lippo Bank it does not own. Lippo Bank is one of the largest private banks in Indonesia initially controlled by Riyadi Family who owns Lippo Group.
Khazanah is the third Malaysian investor to acquire Indonesian banks after the 1997 financial crisis. Commerce Berhad was the first major investor when it acquired Bank Niaga (2003) followed by ICB Group which controlled Bank Bumiputera since last year. ICB is in the process to raise the capital of its Indonesian subsidiary through rights issue sometimes next month.
Khazanah’s name also tipped in the possible acquisition of 71% shares of smaller size PT Bank Tabungan Pensiunan Nasional (BTPN) worth US$90 million. Yesterday, Khazanah denied the report, but people close to PT Perusahaan Pengelola Aset (PPA) said Khazanah is one of investors that expressed interest to acquire PPA’s 28% shares in BTPN.
Late September, Khazanah, the investment holding arm of Malaysian government, subscribed to a 16.8% stake in PT Excelcomindo Pratama for a total cash consideration of approximately US$234 million.
Excelcomindo is the third largest cellular telecommunication provider. Telkom Malaysia, where Khazanah has 40.64% shares, acquired 27% shares of Excelcomindo early this year leaving the founder PT Telekomindo Primabhakti (subsidiary of Rajawali Group led by Peter Sondakh) with the remaining 47.92% and Asia Infrastructure Fund (AIF) with 10%.
With the latest move, Malaysian control 41.8% shares of Excelcomindo, almost the same size with Temasek’s control over Indosat (formerly a state-owned telecommunication company and the second largest in the market).
Khazanah also has indirect investment in Indonesian telecommunication and multimedia market through Astro All Asia Networks where it has 21.52% shares. Early this year, Astro established a joint venture with Lippo Group to develop pay TV business. The new joint venture will invest US$1 billion in Indonesia in the next few years.
Early January, Malaysian telecommunication giant Maxis Communication had acquired a 51% shares of another Lippo subsidiary PT Natrindo Telepon Seluer for US$100 million and announced its plan to turn around the loss-making cellular operator by as early as 2010.
Right before entering the new year, Malaysian YTL Corporation Berhad fired the investment market with its surprise acquisition of 35% stakes in PT Jawa Power for US$139 million. PT Jawa Power is an independent power plant producing 1,200 MW of electricity. Siemens and Powergen are other major shareholders. I bet, a lot more Malaysian investment to come.

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