Ispat opts to bid for Krakatau Steel
Ispat opts to bid for Krakatau Steel
JAKARTA (JP): Netherlands-based Ispat International N.V, which
saw its earlier plan to buy a stake in PT Krakatau Steel canceled
amid controversy, announced yesterday it would participate in the
open bidding process for privatization of the state-owned
steelmaker.
Ispat's chairman and chief executive officer Lakshmi N. Mittal
said the company planned to join other bidders for a stake in
Krakatau through a competitive bidding process.
"We remain confident of the Indonesian government's efforts in
the economic recovery in Indonesia and believe that our decision
to commence fresh discussions with the government, in an open bid
process, will be beneficial to the process of privatization of
state-owned enterprises in Indonesia and of Krakatau Steel,"
Mittal said in a statement.
He said the company had displayed its confidence in Krakatau
Steel by signing the now defunct MOU for up to a 51 percent stake
in the firm on May 7 despite the severe economic turmoil and
uncertainty in the country.
The company's decision not to pursue the terms under the MOU,
he added, was made to dispel the recent controversial market
reports regarding the privatization process of Krakatau which
could affect the privatization process of other state-owned
companies.
The cancellation of Ispat's MOU to buy up to a 51 percent
stake in Krakatau was announced early this week.
According to the Office of the State Minister of the
Empowerment of State Enterprises, Ispat canceled the agreement
due to its inability to meet a June 21 deadline for the
completion of a due diligence on Krakatau Steel at Cilegon in
West Java.
A purchase deal for Krakatau by Ispat came under fire early
this month when Krakatau's top management disclosed publicly that
State Minister of the Empowerment of State Enterprises Tanri
Abeng, quietly signed the MOU on May 7 to sell 49 percent to 51
percent of Krakatau to Ispat.
Krakatau's top executives have complained that Tanri had
signed the MOU without informing them about its contents.
Critics also expressed concern the deal would create a new
monopoly in the domestic wire and rod market because Ispat's unit
in Surabaya, Ispatindo, was already the country's largest
producer.
Tanri said the MOU signing was not a final deal and invited
other investors to enter competitive bidding.
A copy of a letter dated June 12 addressed to Tanri from
Salomon Smith, the investment bank appointed to assist Krakatau's
privatization process, recommended 18 companies, in addition to
Ispat, as being eligible to bid on the Krakatau tender.
The letter shows that six of the companies are from the United
States, five from Japan and one each from Germany, France,
Austria, Taiwan, South Korea, Britain and Australia
They include Australia's Broken Hill Proprietary Company,
British Steel Ltd., America's Pohang Iron and Steel Company,
Germany's Thyssen AG, and Japan's Kobe Steel Ltd., Nippon Steel
Corp. and Kawasaki Steel Corp. (gis)