Prayogo's acquisition of stake in KL firm welcomed

Prayogo's acquisition of stake in KL firm welcomed

JAKARTA (JP): Securities analysts welcomed the US$1 billion
acquisition by Indonesian timber conglomerate Prajogo Pangestu of
a 68.66-percent stake in Malaysia's Construction and Supplies
House Bhd, but warned of cartelization.

"We are much impressed by the fact that Indonesia's Minister
of Investment Sanyoto Sastrowardoyo and Malaysian Prime Minister
Mahathir Mohamad were present at the signing ceremony for the
deal," president of the securities company PT HG Asia Indonesia,
Eugene K. Galbraith, told The Jakarta Post here yesterday.

"It clearly indicates that the share transaction has attracted
high level attention and it implies that there may be some
commercial background to it," he added.

Prajogo over the weekend signed a US$1 billion deal with CASH
in Kuala Lumpur in what was seen as a move to speed up the
internationalization of the Jakarta-listed PT Barito Pacific
Timber as well as to make the Sabah-based CASH a world-class
timber giant.

With the deal, billed to be the largest ever cross-border
acquisition on the Kuala Lumpur Stock Exchange, Prajogo sells his
and his wife's assets in four Barito companies to CASH in return
for 70-percent control of the Malaysian company. Prajogo will
still retain control of Barito Pacific through its 40-percent
private stake.

Since Indonesia and Malaysia are the biggest plywood producing
countries, their cooperation is actually good news for the
business sector, Galbraith said.

"If both parties can properly tap the cooperation and work
together in marketing plywood, it will help stabilize plywood
prices in the world," he pointed out.

But, he reminded of the fact that people in the West are
usually concerned with and question such business cooperation
schemes, which tend to lead to cartel-like businesses.

"But people in Asia seem to be more comfortable with the idea
of cartelization as an attempt to stabilize the market by
controlling the supply and demand of the products," he said.

"I personally don't have strong opinions about the impact, but
I do think that if Indonesian and Malaysian plywood producers can
work together in the business that will be good," he said.

Indonesia's total plywood exports in 1992/1993 climbed to 6.93
million cubic meters from 6.53 million a year earlier.

The integrated timber company Barito holds 22 forest
concessions and is affiliated with 21 more forest concession
holders with a total area of 5.06 million hectares.

Liquid

Like Galbraith, Hindarmojo Hinuri, director of PT PEFCI
Securities, greeted the business deal by saying: "Such a business
breakthrough could be a good model for regional cooperation."

"It is a good business strategy of the Barito group,
considering that the Kuala Lumpur Stock Exchange is very liquid,"
Hindarmojo told the Post.

Both analysts concurred that by having a listing in Kuala
Lumpur, Barito secures good access to much more liquid markets in
the world.

Galbraith noted that on some days the Kuala Lumpur Stock
Exchange was even more liquid than New York Stock Exchange.

In spite of what he sees as a positive move, Hindarmojo still
questioned the lack of disclosure on the deal to its investors
and stock authorities like the Stock Exchange Supervisory Board
(Bapepam).

"We just happened to know about the Barito deal from newspaper
reports," he said, adding that according to Bapepam provisions,
such deals should be reported in advance to the public and
Bapepam.

"I don't know whether the procedure had been fulfilled by the
company. But I would say that disclosure could help smoothen
their internationalization move," he added.

I Putu Gede Ary Suta, Bapepam's head of the corporate bureau
for financial affairs, told the Post that he also learned of
Barito's deal from newspaper reports.

He conceded that there was actually no obligation for the
company to make an advance report to Bapepam: "But because Barito
is listed as a blue-chip company, and the transaction made by its
biggest shareholder Prajogo was tremendous, Bapepam should have
been informed before the deal was concluded."

"I have asked the shareholders concerned to report the deal to
Bapepam. I hope we receive the report before the end of this
week," he said.

Like Galbraith and Hindarmojo, Putu also hailed the
internationalization move of the company. (fhp)