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)