Cemex agrees to govt buy-back

Rendi A. Witular, Jakarta

Mexican cement giant Cemex SA has agreed to the Indonesian government's proposal to reclaim the former's entire stake in publicly listed cement producer PT Semen Gresik (SG) as a way to resolve a protracted investment dispute, a minister said.

State Minister of State Enterprises Laksamana Sukardi said the government was currently seeking third party investors to finance the buyback plan since the government did not have sufficient funds.

"Cemex has agreed to our plan to reclaim their shares in SG. However, at present, we are still undecided over the price, and which investors are willing to do it," said Laksamana after a hearing with the House of Representatives Commission VIII for mining and energy on Wednesday.

"There is no other way but to reclaim the shares. We cannot just completely let go of the shares because politically it would be damaging," he said.

Laksamana previously said his office had asked state pension fund PT Jamsostek to lead a consortium that would carry out the buyback program.

A source at the Office of State Minister of State Enterprises said Cemex had asked the government to buy back its shares at a price of at least Rp 14,500 per share, or about Rp 4.5 trillion (US$500 million) for the stake.

Cemex has a 25.53 percent stake in Gresik while the government has a 51.01 percent stake, with the remainder held by private investors.

SG shares ended unchanged at Rp 10,000 on the Jakarta Stock Exchange on Wednesday, but have surged by 22.6 percent since Aug. 2.

Laksamana said the price for SG shares would be calculated based on its enterprise value against its earnings before interest, taxes, depreciation and amortization, as well as enterprise value against production output.

The dispute between the government and Cemex, the world's third-largest cement producer, arose because the Cemex sale was blocked by local protesters, particularly SG's unit in Padang, and the government was unwilling to defy the protesters and sell the remainder of the stake, as stipulated in an acquisition agreement made in 1998 when the Mexican firm bought the SG shares through a government privatization program.

Attempts to resolve the problem have been unsuccessful, leaving Cemex's investment in limbo. The company has taken the case to the International Center for the Settlement of Investment Disputes (ICSID) to act as an arbiter in its dispute with the government and SG, Indonesia's largest cement producer.

Laksamana said despite the agreement for the buyback option, both the government and Cemex would still try to resolve the dispute through the World Bank-linked ICSID.