Cemex close to clinching PT Semen Gresik deal

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)