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."