Lippo Group's restructuring plan approved

JAKARTA (JP): The Lippo Group announced yesterday that the independent shareholders of both PT Lippo Securities and PT Lippo Life had approved its plan to radically restructure the two finance companies.

The group's chief executive, Roy E. Tirtadji, told journalists yesterday that 65 percent of Lippo Life's independent shareholders had attended an extraordinary meeting yesterday, and approximately 95 percent of them had approved the company's proposal to acquire a 40 percent stake in Lippo Bank for Rp 638 billion (US$272 million).

At a separate meeting, approximately 60 percent of Lippo Securities' minority shareholders endorsed the company's plan to purchase a 27 percent stake in Lippo Life for Rp 243 billion.

The prices set for the two transactions are below the group's initial proposals of Rp 658 billion for Lippo Bank and Rp 244 billion for Lippo Life.

In the two transactions, Lippo Life and Lippo Securities are to pay Rp 100 billion each in cash and issue zero coupon notes for the remaining costs.

The three Lippo companies, according to Roy, would be able to expand their market shares and increase their profits through the deal.

"It's also in line with the group's efforts to gradually reduce its control of its own companies by reducing the share ownership of their founders," Roy said.

Roy claimed that reducing a founders' share holding was one way to enlarge a company: "And it's what Lippo is trying to do. It's our long term vision."

After the transactions, Lippo Securities will own a 32 percent stake in Lippo Life, while Lippo Life will own a 40.15 percent stake in Lippo Bank.

The investing public now owns 55.43 percent of Lippo Bank.

Roy confirmed yesterday that the Riady family would no longer control Lippo Bank after the transactions in which their share holding would be eliminated.

The Lippo Group's plan was announced almost a month ago and has received mixed reactions from independent shareholders and stock analysts.

Some analysts have argued that the Lippo Group would not intend to benefit minority shareholders, while others said the planned transactions would improve if independent shareholders were also allowed to sell their shares in the transactions.

"Who can guarantee that independent shareholders (of Lippo Bank) will sell their positions to meet the management's proposal?" Roy contended.

Roy yesterday refuted claims that the Riady family was trying to get Rp 200 billion in fresh money through the two transactions to resolve their financial problems.

"I can tell you that the Rp 200 billion in cash will be reinvested in Lippo Securities," he said.

In response to independent shareholders' reactions to the first proposal, the Lippo Group sweetened its plan with incentives, including the permanent waiving of a 10 percent management fee on Lippo Bank's pretax earnings, to become effective on Sept. 30.

Roy said the Riady family would reinvest the proceeds of the 15-month zero-coupon notes by subscribing to the rights shares to be issued by Lippo Securities next year.

Roy said Lippo Bank would divest its 14 percent share in Lippo Securities to avoid cross ownership holdings. (alo)