Semen Gresik's imbroglio<\/p>\n
There is nothing substantially new, nor legally meaningful in
\nState Minister for State Enterprises Laksamana Sukardi's letter
\nof April 16 addressed to West Sumatra Governor Zainal Bakar, yet
\npoliticians in this province had prematurely rejoiced, strongly
\nconfident that Semen Padang would soon be spun off from its
\nholding company, publicly-traded Semen Gresik.<\/p>\n
The letter in essence only states that the government, as the
\n51 percent owner of Semen Gresik, understands the aspirations of
\nthe West Sumatra people, and therefore approves of their demand
\nfor Semen Padang's spin-off from Semen Gresik.<\/p>\n
The caveat, though, is that the letter also states that any
\ndecision on the split shall be based on the provisions of the Law
\non Limited Liability Companies and regulations governing publicly
\nlisted companies. This means that government approval legally
\ndoes not matter at all because such a total separation shall be
\napproved by Semen Gresik's minority shareholders, who consist of
\nthe investing public with 23.5 percent and Mexico's Cemex with
\n25.5 percent.<\/p>\n
In yet another harsh reprimand to the current management of
\nSemen Padang, Laksamana's letter also instructs the board of
\ndirectors of this company to conduct a reorganization and
\nrestructuring to improve its performance, which, according to
\nSemen Gresik, has thus far been the worst among its three cement
\nunits.<\/p>\n
The Semen Gresik group, which is based in Surabaya, consists
\nof Semen Gresik with an annual capacity of 8.2 million metric
\ntons, Semen Padang in West Sumatra with 5.5 million tons and
\nSemen Tonasa in South Sulawesi with 3.48 million tons.<\/p>\n
A number of politicians and government leaders in West
\nSumatra, allegedly with full support of the Semen Padang
\nmanagement, have been campaigning since 2000 for Semen Padang's
\nseparation from Semen Gresik, arguing that the dignity of the
\nWest Sumatra people, who had \"surrendered\" their ancestral land
\nto Semen Padang was hurt when Cemex bought into Semen Gresik in
\nlate 1998. Semen Gresik wholly owns Semen Tonasa and 99.99
\npercent of Semen Padang.<\/p>\n
But most analysts and Semen Gresik directors believe that the
\ngroups's real objective is to hold on to Semen Padang as a cash
\ncow they can milk anytime they like.<\/p>\n
Earlier reports from the mass media in Padang and Jakarta told
\nof how leaders of the spin-off team included not only Semen
\nPadang directors themselves but some legislators and
\nbusinesspeople close to the West Sumatra governor who all had
\nallegedly benefited either from supplying materials to Semen
\nPadang or taking part in locally marketing or exporting Semen
\nPadang cement.<\/p>\n
The local people in West Sumatra, notably those in Lubuk
\nKilangan subdistrict where the Semen Padang industrial complex is
\nlocated, do not care who owns the company as long as it creates
\nmaximum benefits to the local community.<\/p>\n
Statements by the Lubuk Kilangan community on various
\noccasions, notably in September 2001, demanded only that Semen
\nPadang emphasize local recruitment, assist them to establish a
\ncement distribution company, implement environmentally friendly
\noperations and contribute more to community development.<\/p>\n
Semen Gresik shareholders have endeavored to replace the
\npresent management of Semen Padang since 2001, citing their
\nutterly poor performance, but the management clung to their
\nposition and rejected an extraordinary shareholders meeting. This
\ncase is now awaiting a ruling from the Supreme Court.<\/p>\n
Certainly, Semen Gresik's minority shareholders will not agree
\non the spin-off, because such a move would damage the value of
\ntheir investment. When they bought Semen Gresik's shares, the
\nshare price was based on the earning potential of a company with
\nan annual capacity of 17.1 million tons.<\/p>\n
If the government pressured these minority shareholders to
\nagree on the split, that would amount to an act of
\nnationalization that would not only set off a messy litigation
\nprocess, but also would scare off domestic and foreign investors
\nin all sectors for the future.<\/p>\n
Even if the minority shareholders somehow agreed to a spin-
\noff, they would certainly demand compensation that could amount
\nto hundreds of million of dollars. How could the cash-strapped
\ngovernment afford this?<\/p>\n
The government can do whatever it has within its power -- and
\nis legally allowable -- according to the stock exchange
\nregulations to meet any legitimate demands from the West Sumatra
\npeople regarding Semen Padang.<\/p>\n
However, succumbing to the vested interest groups' demand for
\na spin-off in violation of the laws would wipe out whatever
\nlittle confidence investors still had in the government's
\ncredibility.<\/p>\n
Much more devastating is that a forced separation will violate
\nstock market regulations and could set off a wave of disputes
\nover state companies, which have been partially privatized.<\/p>\n
Moreover, not a single investor would touch state companies or
\nbanks that are now in the final preparations for strategic sales
\nor initial public offerings on the Jakarta Stock Exchange.<\/p>",
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"sponsor": "Okusi Associates",
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