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.