`Govt must not take unilateral action in cement dispute'
Dadan Wijaksana, The Jakarta Post, Jakarta
Any unilateral action by the government to spin off cement companies PT Semen Padang and PT Semen Tonasa from their publicly-listed parent company PT Semen Gresik (SG) would cause a convoluted legal dispute, a law expert said.
The move would also be detrimental to the government's privatization program, said Todung Mulya Lubis, a lawyer for Semen Gresik said.
"This (spin-off approval) would create a bad precedent, and other state-owned firms that have been privatized might ask for similar treatment," Todung told The Jakarta Post on Monday, adding that this would further damage the country's credibility in the eyes of investors.
Owning 99.9 percent of the shares in both Semen Padang and Semen Tonasa, SG is 51 percent owned by the government, 23.46 percent by the investing public, with the rest of the company being owned by Mexico's Cemex SA de CV. SG is currently the country's largest cement manufacturer with a total capacity of around 17.25 million metric tons.
Todung was commenting on the latest developments regarding the status of SG's subsidiaries, Semen Padang and Semen Tonasa, which are located in the provinces of West Sumatra and South Sulawesi respectively.
Some people, including politicians, local government officials and employees of the companies in the two provinces have long been demanding that the central government spin off Semen Padang and Semen Tonasa from SG.
State Minister for State Enterprises Laksamana Sukardi is reported to have sent a letter to the governor of West Sumatra approving the demand for a spin-off as long as it did not violate the law.
However, Todung challenged this, saying it would run counter to the prevailing legislation governing limited liability companies and the capital market.
Under these provisions, minority shareholders are given a say in any major corporate actions undertaken by publicly listed companies. "So, the government is not completely to do as it likes as the majority shareholder in this case," Todung argued.
The fact that, according to sources, copies of the letter were never sent to SG's management, nor Cemex's, has raised eyebrows over the validity of the letter, and what it actually means.
Worse still, Todung added, if the government went ahead with the spin-off plan, it would have to compensate both the public and Cemex.
"When Cemex, and the public, bought SG shares, the paid their money based on the assumption that SG's total output was around 17.25 million metric tons.
"But if the two subsidiaries are hived off, this would mean that the shares were overpriced as the company's production capacity will be much lower," Todung said.
Semen Padang and Semen Tonasa have a combined production capacity of around 9 million metric tons in total.
Given the consequences if the government were to proceed with a spin-off plan, many would tend to doubt that the move would secure the approval by SG's upcoming shareholders' extraordinary meeting.
The government has said that it expects the meeting to be held in the middle of next month at the latest.
The real reasons behind Laksamana's letter remain unclear, but there is speculation that the move is aimed at cooling down tensions in the region.
Semen Padang is no stranger to controversy. It was the company's fierce opposition, backed up by the provincial executive and legislature, that forced the government two years ago to cancel the planned sale of the 51 percent SG stake in the Padang operation to Cemex.