Cemex close to clinching PT Semen Gresik deal

JAKARTA (JP): Mexico's Cemex S.A. de C.V. is set to take a 14 percent stake in state-owned cement manufacturer PT Semen Gresik if no other bidder tops its offer by Sept. 28, according to a senior government official.

The deputy communications director for the State Minister of the Empowerment of State Enterprises, Sofyan Djalil, announced on Thursday that Cemex had won the first bidding round by offering US$1.38 per share, totaling $114.6 million, and that the company had the right to match any new bid submitted in the upcoming second round.

"The deadline for submitting a bid in the second round is Sept. 28 at 5 p.m., and Cemex has the right to top any new bid until Oct. 6," he told journalists at a news conference.

He added that the winner would be allowed to purchase at least another 6 percent stake in the publicly listed company through a tender offer mechanism on the local stock market.

Cemex's contenders in the second round are Germany's Heiderlberger Zement AG, Switzerland's Holderbank and France's Laferge Asia Pacific.

Cemex, the world's third largest cement maker, was the government's preferred bidder after it won the first round of a July privatization offering for Semen Gresik. At that time, the government had planned to divest 35 percent of the company at $1.38 per share in order to bring in $287 million in proceeds.

The plan, however, met with stiff public criticism in August, with many observers pointing out that the plan could place the country's largest cement producer under possible foreign domination.

The scheme had stipulated that the foreign strategic partner had the right to purchase another 16 percent share in Semen Gresik through a tender offer mechanism to become a majority shareholder.

The government quickly surrendered to public pressure and decided later in August that it would only sell a 14 percent stake in the company.

Sofyan said that despite the revision, Cemex had agreed to the terms made under the initial plan, including paying $1.38 per share and an export commitment.

Cemex has committed to export 2.1 million tons of Semen Gresik's products in 1999, and 7.4 million tons in 2000.

"This export commitment is very important because Semen Gresik currently suffers from a production overcapacity and domestic demand is very low," he said, pointing out that an existing expansion program would raise the company's total annual production capacity to 17.2 million metric tons by the end of this year from a current 12.7 million tons.

He also explained that because Cemex would become a minority shareholder, "the government will provide protection".

He pointed out that if Cemex could hold between a 14 percent and 25 percent stake in Semen Gresik, it would have the right to put one of its executives in the board of directors and another one in the board of commissioners.

"If they had more than 25 percent, Cemex would have the right to put two people in the board of directors and two in the board of commissioners," he said.

Semen Gresik's shares on the Jakarta Stock Exchange ended at Rp 7,425 on Friday, up Rp 275 on earlier news in the day that Cemex had maintained its bid for the company at $1.38 per share.

Semen Gresik is the first of 12 state-owned companies to be privatized in the current fiscal year ending in March 1999, during which the government expects to raise a total of $1.5 billion in privatization proceeds to help finance the state budget.

Due to the sluggish capital market situation, however, the government recently admitted that its privatization proceeds target was not achievable. It claimed that the shortfall would not affect the budget because it had abandoned several high-cost subsidies. (rei)