Ispat still in running for Krakatau steel bid

Ispat still in running for Krakatau steel bid

JAKARTA (JP): Netherlands-based Ispat International has
priority on a tender for privatization of state-owned steelmaker
PT Krakatau Steel if it can match the most competitive bid, an
official said yesterday.

Deputy to the state minister for the empowerment of state
enterprises, Markus Permadi, said the normal competitive bidding
process for Krakatau's privatization had been modified to
accommodate its potential buyers as the company had not attracted
many interested investors.

"The unsolicited bidder (Ispat) can conduct due diligence
before other bidders, then it can bid an initial price which we
will accept and announce publicly if attractive enough," he said.

The government would then invite other bidders to conduct
their due diligence and to bid initial offers which would have to
be higher than the offer of the unsolicited investor, he said.

If the solicited bidders came up with higher prices, the
unsolicited investor could raise its offer to the level the
solicited bidders had offered and would have the priority for it,
he added.

A purchase deal for Krakatau by Ispat came under fire last
week when Krakatau's top management disclosed publicly that Tanri
had signed a Memorandum of Understanding (MOU) with Ispat on May
21.

Krakatau's board of directors claimed they were neither
involved in the process nor informed about the acquisition plan
by Ispat, which wholly owns a steel company PT Ispatindo in
Surabaya.

It was feared that its acquisition of Krakatau would give
Ispat a monopoly in the domestic steel wire and rod industry.

Tanri said earlier the MOU signing was not a final deal, and
he invited other investors to enter the competitive bidding.

Yesterday, tens of people from Cilegon, West Java, where
Krakatau Steel is located, demonstrated at Tanri's office at
Jakarta Stock Exchange Tower II, demanding that the deal with
Ispat be canceled.

Tanri met them in the lobby and asked their support in the
privatization of the firm. The demonstrators then dispersed
peacefully.

Markus said some of the state firms being privatized by the
ministry were not attractive enough to invite investors.

The government would give priority to any investor which
showed their interest in becoming strategic partners of these
companies, he said.

The government could modify the privatization process to suit
the interested investors. They could sign MOUs with the
government which would allow them to conduct due diligence
without waiting for other bidders.

"We are afraid that we may lose them because of the
uncertainty regarding stability in the country," Markus said.

But other companies, such as telecommunication firms PT
Indosat and PT Telkom, were flooded with bidders, as they had
sound financial performance, management and earned dollar-
denominated incomes, he said.

Several investment banks and fund managers have been attracted
to acquire stakes in Indosat and Telkom, he added.

Normally, bidders had negotiate a lengthy process involving
due diligence and evaluations before it could sign the
confidentiality agreement and make offers.

During the privatization process, the management of the state-
run companies would not be involved in approving or rejecting
offers from potential buyers, Markus said.

They would only be involved when potential buyers conducted
due diligence, he added. (das)