Sat, 06 May 2006
Rajawali aims to up SG stake after buying out Cemex

The Jakarta Post, Jakarta

Local investor, the Rajawali Group, which has agreed to purchase Mexican cement giant Cemex SA's stake in PT Semen Gresik (SG) for US$337 million, said it was interested in increasing its holding in the country's largest cement producer.

"We sincerely hope that the government will give us the chance to increase the stake," Rajawali's managing director, Darjoto Setyawan, said in an interview Friday with Bloomberg.

"We understand that 25 percent is a minority stake. But we think we can unlock the value of Semen Gresik."

Cemex, the world's third largest cement producer, said in a statement Thursday that it would sell its 24.9 percent stake in SG to Rajawali, pending approval from the government.

The shares will be sold at $2.28 each, or a 28 percent discount on their Wednesday closing price on the Jakarta Stock Exchange. SG's shares were suspended from trading on Friday, after plunging 12.5 percent Thursday to Rp 24,500 on profit-taking.

Rajawali, owned by businessman Peter Sondakh, started out as a trading firm in the 1980s, but by the mid 1990s the company had transformed itself into a highly diversified business group. It is now a regional player with interests in tobacco, taxi firms, charter airlines, oil palm plantations, upmarket residences and hotels, and department stores. The group employs about 30,000 employees.

The group cofounded the country's first private TV station, RCTI, and the country's first privately owned cellular telecommunications operator, PT Excelcomindo Pratama. It has also been credited with turning around loss-making cigarette maker PT Bentoel.

Meanwhile, SG announced Friday that it booked a net profit of Rp 287 billion for the first three months of 2005, more than double the Rp 115 billion in the same period last year.

Net sales revenues improved by 38 percent to Rp 1.94 trillion on rising cement demand for reconstruction work in Aceh.

Cemex decided to sell its stake in SG so as to bring closure to a four-year-long dispute with the government. It was left with a minority stake in SG in 1998 after the government reneged on a contract to grant control of SG to Cemex.

The Mexican cement producer, which usually operates the companies in which it buys stakes, had sought the government's permission to raise its stake to 51 percent for a consideration of $503 million, saying it could save $50 million annually at SG by increasing efficiency.

SG unit PT Semen Padang scuppered the plan in 2001 by transferring its ownership to the West Sumatra administration. The resulting long-drawn-out imbroglio badly shook investor confidence in the legal certainty situation in Indonesia.

Vice President Jusuf Kalla said last month that the government wanted to see Cemex's shares in SG bought by local investors as the cement industry was of strategic importance. He also said that this would help avoid a cement cartel emerging if SG fell into the hands of foreign investors.



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