Govt may offer Cemex more SG shares: Minister

Govt may offer Cemex more SG shares: Minister

Urip Hudiono, The Jakarta Post/Jakarta

With the option of buying back Cemex SA's shares in state-owned
cement producer Semen Gresik (SG) no longer viable, the
government will likely offer the Mexican cement giant a majority
stake in SG to amicably settle the protracted investment dispute
between them.

"Cemex has said that it will not sell its shares, so any
notion of the government buying them back is now out of the
question," Coordinating Minister for Economy Aburizal Bakrie said
on Monday. "The government also has no money."

Aburizal, who insisted that the cash-strapped government would
refuse to pay any compensation claims as part of the dispute's
out-of-court settlement, said that one of the most likely options
was therefore to let Cemex buy more shares in SG.

"Cemex could buy up to 49 percent or 51 percent of SG's
shares," he said. "And we are ready to sell the shares, as long
as they are sold at a good price, or at least at a better price
than now."

Cemex currently has a 25.53 percent stake in the publicly
listed SG, while the government has a 51.01 percent stake. The
remaining 23.46 percent is held by the investing public.

Aburizal, however, said that the government would still
carefully consider the option to prevent the country' cement
industry from being taken over or dominated by foreign firms.

"But I don't think that it will be a problem as SG's
production capacity is only 17 percent of the country's total,"
he said, comparing it with Semen Cibinong, which is 76 percent
owned by Swiss cement firm Holcim, and whose production capacity
accounts for 20 percent of the national total.

But with German cement firm Heidelberg already the major
shareholder in Indocement and French cement company Lafarage the
main shareholder in Semen Andalas, such concerns could come true,
thus raising the sort of nationalistic sentiment that could snag
the latest out-of-court settlement option.

The viability of the option, however, remains in question as
the long-standing dispute between the government and Cemex has
been the result of the latter's failure to execute such an
option.

Under the deal made with the government in 1998, when Cemex
first bought SG's shares, Cemex was given the option of
increasing its stake so as to become the majority shareholder
after a number of years. However, Cemex was unable to realize the option
given strong oppositions from the management of the West Sumatra-
based Semen Padang -- an SG subsidiary -- and local politicians
who said they feared that foreigners would come to dominate the
nation's cement industry.

Cemex, therefore, decided to take the case to the
International Center for the Settlement of Investment Disputes
(ICSID), demanding that the government pay damages.

The government had previously offered to buy back Cemex
shares in SG to settle the dispute, but the plan was never
realized. A source at the Office of the State Minister for 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 ($500 million) for the full stake.

With the government's plans to promote infrastructural
development next year, the country's cement industry looks like
becoming a lucrative prospect, with demand expected to grow by up
to 10 percent, industry analysts say.