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)