Analyst says Astra should not disclose inside information

JAKARTA (JP): Securities analyst David Chang said on Thursday that PT Astra International had a legitimate reason not to disclose all inside and proprietary information requested by the Newbridge/Gilbert-led consortium of investors.

" I see the coordination between Astra and IBRA as not so good. Thus, Astra does not trust the preferred bidders," Chang of PT Trimegah Securindolestari said, referring to Newbridge Capital and Gilbert Global Equity Partners who are conducting a due diligence on Astra.

The Indonesian Bank Restructuring Agency (IBRA) chose on Dec. 9, without a competitive bidding process, an investor group led by Newbridge and Gilbert of the U.S. as the preferred bidder to purchase the agency's 40 percent stake in Astra International.

The due diligence, conducted by Newbridge/Gilbert on behalf of IBRA, is part of the process to complete the transaction sometime in February as scheduled.

Chang said Astra could not be expected to provide all confidential information because it could not be assured a potential investor would make a definite commitment.

Sources close to the transaction said Newbridge/Gilbert was approved on Dec. 15 to conduct a due diligence after IBRA resolved the legal technicalities of its ownership of Astra shares.

The sources said Newbridge/Gilbert submitted two bundles of lists, containing requests for information and documents, to Astra's management.

One list was for 80 categories of documents. The other requested Astra's management to provide 81 categories of information on Astra as a holding company, 123 categories of information and projections on its automotive division, 260 categories of information on its agribusiness division and more than 100 categories of information on its financial services division.

"You tell everything in a due diligence and the information you give could be the lethal weapon against your business," Chang added.

"Astra does have the right not to disclose too much about the company when Astra is still not sure whether the investors will keep it confidential."

The sources said the information, projections and other reports requested by Newbridge/Gilbert were so detailed as to cover new products to be launched, their costs of production, Astra's pricing strategy, profit margin and other proprietary information. They said the information could put Astra out of business if it was leaked to its competitors.

Chang concurred that questions about products' profit margins were market-sensitive information which would be detrimental to Astra if obtained by competitors.

"It is therefore reasonable to demand that a preferred bidder put up an upfront payment as evidence of its commitment. If such an upfront payment was not required, then everybody could go to Astra and say 'I want to look at your books. I want to know all the details'," Chang said.

He did not consider the appointment of a preferred bidder to be a problem as long as the process was transparent and fair.

It also would be normal for IBRA to have a preference for particular foreign investors, he said, emphasizing again that the process should be transparent and the underlying reason sensible.

"And preferred bidders certainly always have the advantage and other bidders may only try their luck."

IBRA deserves the right to decide who is the preferred bidder and, because Astra was an important national firm, it was understandable for IBRA to decide who was the preferred bidder, he said.

"You just cannot open it up for everybody to bid because the ones who bid highest may not be the best for the company."

Chang said there was no need to worry that any party could vie for the 40 percent stake because the company's shares were not cheap. (udi)