Prajogo seals $1b share deal in Malaysia

Prajogo seals $1b share deal in Malaysia

KUALA LUMPUR (AFP): Indonesian timber group Barito signed
Saturday a one-billion-dollar deal with Malaysia's Construction
And Supplies House Bhd (CASH), which the firms said would
"internationalise" Barito and make CASH a world-class timber
giant.

But analysts said the deal appeared more an arrangement for
Barito chairman Prajogo Pangestu to acquire a low-priced
Malaysian construction firm with good earnings potential and for
CASH to ride on the success of the world's largest plywood
producer.

"With this pact, Barito will be ready to go international,"
Prajogo said after sealing the 2.59 billion ringgit (US$1.03
billion) deal to sell assets in four Barito companies to CASH in
return for 70-percent control of the Malaysian firm.

Barito officials said they had major plans for CASH, which
included a new plywood plant in Papua New Guinea, extensive
reforestation projects in Malaysia and manufacturing and toll
road investments in China.

"We can now be a world leader in production of processed
timber and reforestation," CASH managing director Joseph Ambrose
Lee said of the deal, which gave his company a 30-percent stake
in Barito Pacific, Indonesia's largest timber firm.

Official said the pact, whose signing was witnessed by
Malaysian Prime Minister Mahathir Mohamad and Indonesian Minister
for Investment Development Sanyoto Sastrowardoyo, was a "shining
example of regional economic cooperation."

The deal was the largest ever cross-border acquisition on the
Kuala Lumpur Stock Exchange (KLSE) and involved two stages.

Under the first, Prajogo agreed to sell timber-related assets
he jointly owned with his wife, Harlina Tjandinegara, in four
Barito companies in Malaysia, China and Papua New Guinea to CASH
in exchange for new CASH shares worth 700 million ringgit.

This transaction was originally proposed in February but has
been widened to include another step, where Prajogo is to
exchange 210 million Barito Pacific shares for 1.89 billion
ringgit, or 3.46 dollars each, in cash, new shares and
irredeemable convertible unsecured loan stocks from CASH.

Lee said CASH would have to pay a total 2.59 billion ringgit,
inclusive of 350 million ringgit in hard currency, for the deal.

"It's worth the price. At three dollars a piece, it's a damn
good buy," Lee said of the Barito Pacific shares to be acquired
by CASH.

Analysts noted that when the transactions were completed,
Prajogo would own 70 percent of CASH and still retain control of
Barito Pacific through a 40-percent private stake and CASH's 30
percent in the company.

They also noted that the transactions would leave CASH's per
share earning at a low rate of 24 ringgit, which made it an
attractive buy.

"CASH is a loss-making company now and presents an excellent
buy for Pangestu to invest on the KLSE," said an analyst, who
declined to be named.

Prajogo, however, dismissed the view. "I don't think CASH's
per share earning is that low. We have always wanted to invest on
the KLSE but we wanted a partner, not a shell company."