Investors to file sealed bids for IBRA's 45% stake in Astra

Investors to file sealed bids for IBRA's 45% stake in Astra

JAKARTA (JP): Three foreign investor groups are scheduled on
Thursday (this afternoon) to submit sealed bids for the
Indonesian Bank Restructuring Agency's 45 percent stake in PT
Astra International, the country's largest carmaker.

This is the last stage of what analysts here see as a
'turbulent' competition for a controlling ownership of Astra
which started last August when Newbridge-Gilbert investor
consortium began discussions with IBRA for the Astra shares.

The winner itself will be announced on Saturday and a
definitive transaction will be concluded next Friday when IBRA
expects to get at least US$500 million for immediate transfer to
the state treasury, which will subsequently plug the hole in the
state budget.

The three final bidders, shortlisted last month, are: a
consortium led by Newbridge Capital Ltd. and Gilbert Global
Equity Partners of the U.S. and which also includes Chase Asia
Equity Partners Consortium and Indonesia's Saratoga Investama
Sedaya; a group of investors including Bhakti Investama and
Indonesian Recovery Company Ltd led by Lazard Asia Fund, a unit
of Lazard Freres & Co.; and a Singaporean group led by listed
auto distributor Cycle & Carriage Ltd. with Batavia Investment
Management and J.P. Morgan.

"The assessment process will be totally fair. We will only
select the best bidder," IBRA's spokesman Franklin Richard said,
alleviating fears that the agency would engage in unfair conduct.

Head of IBRA Asset Management Investment Group Dasa Sutantio
agreed that there was no preference for any of the three bidders.

But IBRA senior vice president Arwin Rasyid said price was not
the only factor assessed in selecting the winning bidder.

"There are other conditions that have to be fulfilled by the
bidders. We therefore need two days for evaluation," Rasyid
added.

Analysts say successfully completing this transaction will
further enhance international investor confidence in Indonesia's
economic recovery and improve IBRA's credibility which was
damaged last year by its botched dealings with Standard Chartered
Bank of Britain for investment in Bank Bali.

Budi Ruseno of PT Bhakti Investama said a smooth and fair deal
on Astra sale would give a positive impact to investors'
confidence in Indonesia, especially IBRA.

Fundamentally Astra is sound and already has an established
operating system.

"It does not make any difference either for the government or
Astra as to who would win the bidding as long as the target of
sale proceeds can be reached," Budi added.

" A smooth Astra sale is important to help rebuild investors'
confidence," agreed Lin Che Wei, head of research at PT SG
Securities Indonesia.

Che Wei said the safest, most credible way for the government
to pick the winner was to let the bidder with the highest price
win the bidding, considering all the politics involved in the
transaction.

He understood that this time the bidding was not soley about
the price, but also other considerations.

"But most importantly, the selection process must be seen as
totally fair and transparent."

Che Wei and several other analysts suggested that the
presentation of the sealed bids (today) be witnessed by a
representative of the World Bank or International Monetary Fund
and the bids be received by an independent notary public.

"This may be one effective way of dispelling concerns about
collusion or conspiracy that could happen between Thursday and
Saturday," Che Wei added.

Best position

Analysts consider the Newbridge-Gilbert consortium as being in
the best position to get the deal given their long investment
experiences in Asia, an estimated $29 billion in capital under
their management, the lead time they had in valuing Astra and the
superior consulting they receive from former controlling owners
of Astra.

Newbridge-Gilbert seemed undaunted by the failure of its
previous attempt to acquire the Astra shares.

Their initial bid for the Astra stake under an agreement with
IBRA last September ended up in tatters in January after weeks of
acrimonious debate with the Astra management over an alleged lack
of transparency, its questionable status as the preferred bidder
and contention over a due diligence.

IBRA terminated Newbridge-Gilbert's position as the preferred
bidder in January and opened a competitive bid in February that
produced the three final bidders.

"I think Newbridge-Gilbert is one of the frontrunners, given
the leadtime it enjoyed in assessing Astra and the advice it has
been getting from its local adviser, Edwin Soeryadjaya," Che Wei
said.

Edwin, president of Saratoga Investama, is the youngest son of
William Soeryadjaya who founded Astra in 1957 and was the
controlling owner of the company until 1993 when the family lost
its ownership to settle the debts of Edward, Soeryadjaya's eldest
son.

However, Che Wei added that Cycle & Carriage is also strongly
committed to becoming a strategic partner in Astra. The Singapore
company, faced with limited business opportunities in the city
state, is eager to expand its business to Indonesia.

"Cycle and Carriage, the distributor of Mitsubishi, KIA,
Mercedes Benz and Proton cars, is almost desperate now to expand
its business through Astra as it will soon lose its lucrative
Mercedess distributorship," Che Wei said.

Rumors in the market on Wednesday said Lazard Freres might
decide on a last-minute withdrawal from the bid, given the keen
competition posed by the other two bidders.

One analyst who preferred anomynity said Lazard was surprised
by a notification by IBRA to the three bidders last week that the
agency would sell more than 1.04 billion shares (45 percent) and
not 850 million as stated previously.

"Lazard might face severe time restraints to collect
additional investment commitment to acquire the stake," the
analyst added.

IBRA has indicated that Rp 4,000 (US$.54) per share would be
the floor price for the deal. That was higher than the Rp 3,750
offered by Newbridge-Gilbert last year.

Astra closed on Wednesday at Rp 3,725.

Che Wei said the bidding prices that are to be submitted on
Thursday would most likely be higher than Rp 3,750.

"Newbridge-Gilbert had offered Rp 3,750 last year even before
it conducted a due diligence on Astra. Now that they have
completed a thorough assessment, their bidding price may be
higher than that," Che Wei added.

"Personally, I think, the Astra shares could rise to as high
as Rp 5,500 within the next six months if the company could
smoothly carry out its divestment plans and the economic remained
on the recovery track."

However, some analysts argued that investors' valuation of
Astra might change either for good or bad, depending on the
findings of their due diligence on the company over the past four
weeks.

The Newbridge-Gilbert consortium itself has been highly
confident of winning the Astra shares, citing its $90 million
successful deal to acquire Astra's electronics unit (AMT) in
Batam Island near Singapore in December 1998 as an example of its
good investment experiences in Indonesia.

Analysts agree that of all the competitive bidders, the
Newbridge-Gilbert consortium ( which calls itself International
Investment Partnership) has the most transaction, investment and
operating experience in Asia, and particularly in Indonesia.

White paper

This group has even prepared a white paper, distributed here
last week, which articulates a broad strategy to further enhance
and expand Astra's present businesses in automobile, motorcycle,
financing, heavy equipment and agrobusiness.

The white paper claims Newbridge-Gilbert won't break up Astra
but would leverage on its international investment network to
expand Astra's export capabilities.

"Newbridge-Gilbert is looking at Astra as a long-term
investment and would add value by growing businesses and
investing more capital in Astra, and would do so by involving
world class management in Astra's leadership," the white paper
states.

The group cited its track record in building long-term
partnerships through investments in Advanced Microtronics
Technology (AMT) in Batam, the Asian Infrastructure Fund, Amkor
Technology, ASAT Inc. and Kerry Properties (in Hong Kong), Mando
Machinery Corporation (Korea's leading auto component producer)
and Korea First Bank, Japan's Internet company Livedoor KK and
Bangkok-based Hana Microelectronics Plc.

Newbridge-Gilbert intends not only to retain existing members
of Astra's management but also to broaden the reach of the newly
implemented employee stock option program.

Astra in 1999 reported unaudited consolidated revenues of Rp.
15 trillion ($2 billion), operating profit of Rp 2.3 trillion and
net income of Rp 809 billion. Considered the best-managed
business group in the country, Astra succeeded last year in
restructuring $975 million and Rp 1 trillion of its debt, the
largest corporate debt restructuring to date in Indonesia.

The paper says Newbridge-Gilbert intends to rebuild Astra by
keeping and serving existing customers and retaining the
company's Indonesian identity and brand.

This transaction, the group claims, will benefit everyone:
Astra employees by increasing job security, Astra customers by
offering better products and services, the Indonesian government
by gaining global respect and Indonesia's people by reducing
their debt and attracting much-needed capital to the
nation.(udi/rei/vin)