Lippo Group's restructuring plan approved

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)