Newbridge-Astra spat may scupper deal

Newbridge-Astra spat may scupper deal

JAKARTA (JP): A U.S. investor consortium fired on Thursday the
first salvo in what could become a protracted wrangle in its
planned takeover of PT Astra International, charging the
management of Indonesia's largest automaker with attempting to
obstruct a due diligence process.

Astra executives dismissed the charges by Newbridge Capital as
groundless, saying the investor consortium only obtained legal
clearance on Dec. 15 from the Capital Market Supervisory Agency
(Bapepam) to conduct the due diligence.

The Indonesian Bank Restructuring Agency (IBRA) chose the
investor group led by Newbridge Capital and Gilbert Global Equity
Partners equity funds on Dec. 9 as the preferred bidder to
acquire the agency's 40 percent stake in Astra. The selection was
made without an open tender.

But Newbridge and Gilbert said in a release from Singapore on
Thursday that they were extremely concerned about the prospects
of completing the transaction because Astra's senior management
continued to obstruct the due diligence and other related
processes necessary to complete the deal.

"As a result, the Gilbert/Newbridge investor group is
extremely concerned about meeting IBRA's timetable for the
proposed completion of this transaction," Gilbert chairman Steven
J. Gilbert said.

He said many of his investment partners around the world were
seriously considering sizable direct investment in Indonesia.

"But these developments have been very disappointing. It is
unfortunate that the authority and legitimacy of IBRA is being
challenged and effectively dismissed by Astra management."

Analysts here consider the Newbridge/Gilbert deal for Astra as
important for winning back foreign investors, particularly after
controversy forced Standard Chartered Bank Plc to quit its
investment deal in Bank Bali.

"Yes, it could follow the fate of Standard Chartered if the
Indonesian government does not act firmly," an adviser for
Newbridge told The Jakarta Post on Thursday.

IBRA, under pressure to raise Rp 17 trillion (US$2.4 billion)
for the state budget by the end of March, signed a deal with
Newbridge/Gilbert on Dec. 9 under which a floor price for the
Astra shares was set at Rp 3,750, or about the range of the Astra
share quotations on the Jakarta Stock Exchange in recent days.

If the transaction is closed in February as scheduled, IBRA
would receive more than Rp 3.5 trillion (about $510 million).

Astra president Rini Soewandi repeatedly denied that she and
other directors tried to block the IBRA-Newbridge/Gilbert deal or
obstruct the due diligence needed to complete the transaction.

"The Indonesian securities watchdog (Bapepam) confirmed IBRA
as an insider party (significant shareholder) of Astra only on
Dec. 15," Rini said.

She argued that without being an insider party or shareholder
with at least a 20 percent stake, IBRA or Newbridge/Gilbert is
not allowed under the securities laws to obtain inside and
proprietary information from Astra.

IBRA controls about 40 percent of Astra, thereby making it the
largest single shareholder, through a combination of stakes
pledged to it by conglomerates as repayment of their debts to the
central bank.

Other shareholders of Astra include Toyota Motor Corp., the
International Finance Corp., the private-sector arm of the World
Bank and the investing public.

"As a publicly listed company, we have to play by the rules of
Bapepam and the securities laws," Rini said.

Newbridge/Gilbert alleged that the data it obtained from Astra
did not meet professionally acceptable standards of an open,
cooperative and meaningful due diligence process.

Astra executives countered that as a blue-chip company on the
Jakarta Stock Exchange, Astra International was known for the
high standards of its transparency and disclosure of information.

Astra cited its recent success in rescheduling more than $1
billion in debts to dozens of foreign creditors, pointing out
that "without complete honesty, transparency and accountability
on our part, those creditors would not have been willing to
reschedule their loans".

Astra International made a sharp turnaround this year, earning
a profit of Rp 330 billion in the first nine months, compared to
a loss of Rp 1.8 trillion in the same period last year.

Besides dominating the country's car and motorcycle market
which has begun a strong recovery, Astra International also is a
major player in agribusiness and financial services.

IBRA's appointment of Newbridge/Gilbert as the preferred
bidder without a competitive bidding process appeared to irk
Astra management, which preferred a more transparent process
involving a larger number of bidders.

Analysts here also questioned why the Newbridge-led consortium
did not provide upfront payment to support its commitment, but
was nonetheless given virtual blank check by IBRA in obtaining
information from Astra International through a 35-day due
diligence.

"The mountains of documents, historical data and projection
reports they have asked for are so huge and wide-ranging that
Astra executives may be preoccupied for several months simply
with the process of preparing them," an analyst from a joint
venture securities company said.

Several analysts also considered it strange that the
Newbridge/Gilbert-led consortium was given the right to match any
higher bids to acquire Astra shares.

"The Newbridge consortium's right to match any higher bid may
discourage other interested investors from making an offer,"
another executive close to the deal added.

He argued that it would be pointless for other investors to
make a bid if the Newbridge had the right to match, and not
better, their bid for the stake.