Battle for Astra International shares escalates

JAKARTA (JP): The battle for the acquisition of the almost 40 percent of PT Astra International the Indonesian Bank Restructuring Agency claims to control has escalated since Cacuk Sudarijanto took over as head of the agency last week.

Cacuk has proposed that Astra's extraordinary shareholders meeting, scheduled for Feb. 8, replace the company's Rini Soewandi-led management in a bid to increase shareholder value, securities analysts disclosed here on Monday.

"If that is the reason it appears quite strange. First of all, the management has succeeded in raising the price of Astra shares from as low as Rp 225 last year to over Rp 3,750 (US$0.52) now, and in turning the company around from a huge loss to a respectable profit level," an analyst from a joint venture securities company said.

Cacuk's proposal is nothing but an attempt to bulldoze any legal and technical barriers to IBRA's sale of its Astra shares to an American investor group led by Newbridge Capital Ltd. and Gilbert Global Equity Partners, the analyst added.

According to other sources who have read the agreement between the Indonesian Bank Restructuring Agency (IBRA) and the investor consortium, Newbridge and Gilbert have pledged to retain Astra's current senior management team and assist and cooperate with this team.

Astra International made a sharp turnaround in 1999, booking a profit of Rp 330 billion in the first nine months of the year, compared to a loss of Rp 1.8 trillion in the same period in 1998.

The company also is one of the few major corporate debtors in the country to have successfully restructured its foreign debts, which amount to some $1 billion.

Besides dominating the country's car and motorcycle market, which has begun to show sings of recovery, Astra International also is a major player in agribusiness and financial services.

IBRA's effort to sell its stake in Astra in order to meet its revenue target of Rp 17 trillion by March caused controversy early last month when it was disclosed that the Newbridge/Gilbert consortium had been chosen as the preferred bidder without the benefit of a competitive tender.

IBRA gained control of almost 40 percent of Astra, making it the largest single shareholder, through stakes pledged to it by conglomerates as repayment of their debts to the central bank.

However, according to the securities market watchdog, IBRA has completed the legal process for only 28.64 percent of the almost 40 percent equity in Astra it claims to have taken over from conglomerate debtors.

IBRA, faced with legal problems from the securities market watchdog regarding the planned transaction, heated up the controversy by accusing Astra's management of attempting to block the share sale.

Newbridge joined the fray late last month, alleging that Astra's management tried to obstruct a due diligence it wanted to conduct on the company as part of the agreement it had concluded with IBRA in early December.

Astra executives immediately dismissed the charge, saying the investor consortium only obtained legal clearance to conduct the due diligence on Dec. 15 from the Capital Market Supervisory Agency.

"We are extremely concerned about meeting IBRA's timetable for the proposed completion of the transaction," Gilbert chairman Steven J. Gilbert said in a press statement from Singapore late last year.

Analysts here consider the Newbridge/Gilbert deal for the Astra shares a key to winning back foreign investors, particularly after Standard Chartered Bank Plc was forced out of the investment deal it had reached with IBRA for Bank Bali.

However, the manner in which IBRA handled the Astra deal could lead to a protracted controversy similar to the one that forced Standard Chartered to pull out of its deal to buy IBRA's stakes in Bank Bali last month, some analysts said.

Astra's management itself has expressed disappointment with the manner in which Newbridge/Gilbert was named the preferred bidder, citing a securities market rule that requires an open tender for the sale of more than 20 percent of a public company.

Astra has suggested that IBRA sell its stake in the company in two phases, selling less than 20 percent of the stake in the first phase in order to avoid the compulsory open tender.

Because Astra's share prices are expected to rise after the entry of new investors, IBRA can then sell its remaining stake in the company at a much higher value, the Astra management argued in a recent recommendation to IBRA.

But IBRA seems under pressure to meet its revenue target and its Astra stake appears to be the only jewel among the Rp 600 trillion in assets -- equities and bad debts -- the agency currently controls.

Some analysts also see the terms of the transaction as being full of holes detrimental to IBRA's, and thus the government's, interests.

The Astra shares will be priced at Rp 3,000, compared to the current market price of over Rp 3,750, if Newbridge/Gilbert purchases less than 30 percent of the shares. But the price will rise to between Rp 3,750 and Rp 3,825 per share if the consortium buys more than 30 percent of IBRA's shares.

An analyst said the clause greatly favored the American investor consortium because it could opt to purchase less than 30 percent of the agency's stake and only have to pay Rp 3,000 per share, compared to the market prices of around Rp 3,750.

"Even if they intend to increase their ownership to more than 30 percent by buying additional shares on the stock exchange at the prevailing market price, the investor group still has the advantage from the previous transaction," the analyst said.

Several analysts also saw it as strange that the Newbridge/Gilbert consortium was given the right to match any higher bids for the Astra shares.

"The Newbridge consortium's right to match any higher bid may discourage other interested investors from making an offer," an analyst monitoring the deal said.

He contended it would be pointless for other investors to make a bid if the Newbridge/Gilbert consortium had the right to match the bid.

The consortium is also entitled to compensation of up to $1.5 million if the planned transaction is not closed.

Analysts questioned why the Newbridge/Gilbert consortium, while not being obliged to provide an up-front payment to guarantee its commitment, was given numerous advantages in the terms of the transaction. (udi/vin)