The struggle for control of the Indonesian miner is clouded with complexity, with Nat Rothschild at loggerheads with the board and the Bakrie family. Here are some key questions.
Q What is Bumi and why is it always in the headlines?
A An Indonesian coal miner - and probably the biggest float fiasco the London market has seen in years. Created via 2010’s ill-starred $3bn (£1.85bn) deal between billionaire financier Nat Rothschild and Indonesia’s politically wired Bakrie family, Bumi has lost investors two-thirds of their money and descended into internecine warfare amid claims of theft, email-hacking and lies.
Rothschild, who quit the board last October , has now raised the stakes by calling an EGM to oust 12 of Bumi’s 14 directors, including chairman Samin Tan, new chief executive Nick von Schirnding and senior independent director Sir Julian Horn-Smith.
Rothschild has 18.2pc of the votes versus 29pc for a concert party of the Bakries, Tan and former non-exec Rosan Roeslani. The Bakries claim that, should Rothschild win, they won’t do a deal that sees them split from the company.
= Q So, what has gone wrong? =
A Rewind to June 2010 when Rothschild floated a cash-shell, Vallar, raising £707m at £10 a share. His aim, which looks laughable now, was to buy fast-growing emerging market assets and get them a racy stock market rating by adding London's superior corporate governance. He used Vallar to buy a 29pc stake in the Bakrie-controlled Bumi Resources and 85pc of another Indonesian coal miner Berau Coal, headed by Roeslani. Vallar was then renamed Bumi.
Rothschild’s founding team put in £100m at £10, with around £80m coming from him. But the team also subscribed for £20m of controversial “founder shares”, contingent on them making acquisitions, with Rothschild putting up 80pc of the money. These shares converted into a 6.67pc stake in Bumi, worth £138m at the time of the award.
Since then three main things have happened to wreck the investment. First (Other OTC: FSTC - news) , the coal price collapsed. Second, the Bakries, who had borrowed to fund their 47pc stake, found themselves so cash-strapped they had to sell half of it to Tan. Third, the Indonesian assets have been found to be embroiled in at least $1bn of alleged financial shenanigans. War has broken out over who knew what when.
= Q Is that what the Macfarlanes report is all about then? =
A Up to a point. The law firm has been on the case since September, when Bumi was alerted to “potential financial and other irregularities” at its Indonesian assets, triggering a 25pc share price fall in a single day. Macfarlanes’ investigation is based on a whistleblower document handed to the board by Rothschild.
Tuesday was meant to provide some clarity on what the law firm had found. Instead, Bumi largely focused on what it couldn't say , while sticking it to Rothschild. Bumi blamed him for the due diligence “outsourced” to his Vallar Advisers, though the banks involved in the deal Vallar’s adviser JP Morgan (Other OTC: JPAAZ - news) Cazenove and the Bakries’ Credit Suisse (NYSE: CRP - news) - hardly emerge with credit. What is more, Horn-Smith and another Bumi non-exec a JP Morgan Cazenove vice-chairman, Lord Renwick also approved the deal. Bumi also savaged Rothschild for refusing to disclose the “provenance” of the whistleblower materials, while adding that a “technical examination” showed information had “been obtained illegally by email hacking”. Both, said Bumi, exposed it to “unacceptable legal risks”, particularly in Indonesia.
Rothschild denies both the implied hacking allegation or that he is himself the whistleblower, whose identity he says he must protect. What is more, he reckons the board should be focusing on the $1bn or so that has gone missing.
= Q Does Rothschild have a point? =
A Whatever the provenance of the information, Tan’s own due diligence at the end of 2011 before he bought his $1bn stake in Bumi shows he has known about the alleged financial wrongdoing for more than a year. The board must have known some of it since then, too, because Rothschild alerted it to some irregularities. Yet, the board has got none of the money back despite Tan also chairing Bumi Resources.
Bumi says there is only “circumstantial evidence” of wrongdoing. But much is in the accounts such as $390m for non-existent Yemeni oil fields, $75m that vanished out of Berau into the so-called “Chateau” fund and $231m still owed to Bumi Resources by Roeslani’s Recapital fund. Then, there’s Bumi Resources’ mysterious sale of a 30pc stake in a key coal infrastructure business for just $1 that occurred while Tan was chairman.
Rothschild calls this “surrender” by the board and Tan. Some shareholders appear inclined to agree with him.