Bakrie gains $568m from rights issuance

JAKARTA (JP): PT Bakrie & Brothers announced yesterday that it has generated US$568 million from its sold-out rights issuance, the biggest fund-raising exercise ever conducted by an Indonesian company.

None of the money will be directly channeled into the company's core businesses. "About 49.6 percent or $267 million of the funds generated from the rights offering will be used to finance the company's takeover of PT Indocopper Investama, a mining company," said Tanri Abeng, Bakrie & Brother's president.

The issuance of 189 million rights shares valued at Rp 6,500 ($2.95) each was launched on July 15 and closed on Sept. 15.

Tanri explained that Bakrie & Brother's core businesses include telecommunications, rubber and palm oil plantations, infrastructure development and steel pipes for the oil industry.

The company also has investments in the petrochemical industry, mining and a 4,000-megawatt power project to be constructed in Serpong, West Java.

Tanri also stressed yesterday that although all the funds gained from the share offering will be channeled to business outside the firm's core interests, the company is "very focused" and "immaculately managed".

The executive cited last month's investment of $125 million committed by the American International Group (AIG), an international insurance conglomerate, in Bakrie & Brothers' business to illustrate "the company's true prospects."

Tanri added that AIG provides a "vital role" for Bakrie & Brothers since the American firm also owns a fund management agency called Infrastructure Fund, which can provide technical and financial backing for Bakrie & Brothers' interests in this sector.

He also said that AIG, through the consent of the Bakrie family who will hold about a 52 percent stake after the rights shares issuance, had spend $50 million in the limited public offering. It would result in AIG's holding 6.9 percent of the listed company's expanded shares.

Tanri also said yesterday a group of Japanese companies -- Mitsubishi Oil, Mitsubishi Kasei, Hitochu, Yamaichi and Nomura -- had collectively purchased $40 million worth of shares in Bakrie & Brothers' rights shares.

Core

The executive also said yesterday that Bakrie & Brothers does not need to use the rights-issue proceeds to invest in telecommunications.

"We already raised $90 million this year from the sales of 30 percent of PT Bakrie Electronics, one of Bakrie & Brother's subsidiaries, to PTT Telecom BV of the Netherlands," he said, adding that "AIG also recently injected $75 million into one of our telecommunication interests."

The executive also said that about $90.9 million (18.8 percent) of the funds generated by the limited public offering will be used to repay the company's short-term debts.

In addition, about $65 million (12.1 percent) will be used to acquire a 37.5 percent stake in PT Seamless Pipe Indonesia Jaya.

About $19 million (3.5 percent) will be used to buy Wisma Bakrie, the building housing the group's headquarters, while $19.2 million (3.6 percent) will be used to finance the purchase of a 20 percent stake of PT Arutmin Indonesia, a coal mine operator.

The remaining $68.16 million or 12.4 percent will be used to expand the group's steel-pipe production capacity.

Tanri also noted yesterday that all transactions involving Bakrie & Brothers with other Bakrie-related businesses will be handled by independent appraisers and carried out in a "fully transparent" way.

The listed Bakrie & Brothers is also a completely different entity than PT Bakrie Investendo, a company which is controlled by the Bakrie family and operates in property, entertainment and electronic media, he said.

Tanri claimed that the $267 million buy out of Indocopper, previously owned by Bakrie Investendo, is an example of such transactions.

"Bakrie & Brothers must acquire Indocopper because it controls 9.4 percent of PT Freeport Indonesia, which operates one of the world's biggest copper and gold mine in Irian Jaya," he said.

Tanri also explained that the acquisition was carried out by a complicated shares-swap between Bakrie & Brothers and Bakrie Investendo.

"We just want to control Indocopper," he said. (hdj)