Mon, 07 Feb 2000

Astra meeting may become showdown

JAKARTA (JP): Tuesday's extraordinary general meeting of PT Astra International's shareholders is shaping up to be a showdown between the Indonesian Bank Restructuring Agency (IBRA) and the Astra management led by Rini Soewandi.

IBRA, which claims to own 45 percent of the country's largest automobile company, will push ahead with its proposal to unseat Rini in a final bid to speed up the sale of its Astra stake before the end of next month.

But some analysts say the replacement of Astra management could speed up IBRA's sale of its Astra shares but at a lesser price as investors' interests might be dampened by the appointment of a new management team with an unknown track record.

They said IBRA might find it hard to convince other shareholders of the merits of a massive management shake-up at a time when the company is enjoying a robust recovery.

At the meeting, the Rini Soewandi-led management will likely flaunt its impressive performance record in leading the company through a critical period in 1998 when the Astra share price plunged to as low as Rp 225 under the weight of the economic crisis and political uncertainty.

Astra shares are currently hovering at Rp 3,700.

Astra, which reported a net profit (unaudited) of more than Rp 808 billion (US$109 million) last year, against a net loss of over Rp 1.9 trillion in 1998, is also one of the few Indonesian companies to succeed in gaining foreign creditors' trust for restructuring $1 billion in debts.

But a change in management tops the meeting agenda as IBRA blamed the failure of its previous deal with an American investor group led by Newbridge Capital/Gilbert Global on the uncooperative attitude of Astra management.

Goei Siauw Hong, Head of Research at securities company PT Nomura Indonesia, said IBRA would easily gain majority votes for its proposal for a management shakeup because Rini, who became Astra chief executive officer (president) in June, 1998, was popular among creditors and bankers but not among Astra shareholders.

"I think Rini is not working for the shareholders, and the Astra management has not been as transparent as it often claims," Hong said.

Hong cited the recent sale of Astra Securities and several other questionable transactions with companies controlled or affiliated with politically powerful businessman Mohamad Bob Hasan in 1997.

"We do not know until now what was the sale price of Astra Securities company," he added.

Hong said Astra's management created suspicion when it resisted the due diligence process that would have been executed by Newbridge/Gilbert as part of its deal with IBRA.

Newbridge/Gilbert did not have a problem with the confidentiality agreement demanded by Astra, except that it unusually contained an "indemnity clause" which the investor group could not accept, Hong added.

"The investor group was afraid Astra management would have used a nominee to sue the investor consortium later on based on that indemnity clause," he said.

But Hong also admitted that even if some irregularities were found in a due diligence investigation, they might involve just one or two hundred billions of rupiah which are relatively not significant for a company of Astra's size.

Another analyst, Arif Arryman from ECONIT research institute, said it would be an enormous scandal if the rights of IBRA, as the holder of 45 percent stake in Astra, were not be honored at the Astra shareholders meeting on Tuesday.

"The sale of Astra shares is greatly important to support the state budget and to restore IBRA's credibility in wooing back foreign investors to accelerate the country's economic recovery," Arryman said.

In December, IBRA chose Newbridge/Gilbert as the preferred bidder for its Astra stake, but the American investor group failed to conclude a definitive agreement by the end of the exclusivity period on Jan.31.

Newbridge/Gilbert has blamed Astra management for obstructing a due diligence investigation, but Astra management flatly rejected the allegation saying that it simply asked for a confidentiality agreement to protect Astra and the interests of shareholders and to indemnify Astra directors against legal consequences for disclosing proprietary information.

IBRA decided last week to terminate its controversial agreement with Newbridge/Gilbert and opened a competitive bid that offers a fair opportunity to all interested investors. (udi)