Riady's sweetener fails to boost share trading

Riady's sweetener fails to boost share trading

JAKARTA (JP): Mochtar Riady's planned sweetener in the
proposed restructuring of his family's finance companies -- Lippo
Securities, Lippo Life and Lippo Bank -- failed to boost trading
of the three companies' shares on the Jakarta Stock Exchange
(JSX) yesterday.

The widely reported incentives to be provided by the Riyadi
family in its controversial restructuring plan also failed to
significantly support the companies' share prices.

Lippo Bank shares gained Rp 50 to close at Rp 3,650 on the JSX
yesterday but only about 1.5 million shares changed hands on the
regular market, down from the 1.8 million shares traded Thursday.

Lippo Securities shares closed unchanged at Rp 1,450 in active
trading, but the transaction volume fell to 2.07 million shares
yesterday from 7.7 million shares on Thursday.

Lippo Life Insurance shares lost Rp 25 to end the day at Rp
2,025 in heavy trading, with over 9.1 million shares changing
hands, down slightly on the 9.6 million shares sold Thursday.

James Riady, deputy chairman of the Lippo Group, announced a
six-point plan Thursday to sweeten the planned restructure of the
group's financial services.

The six point plan is as follows:

* A permanent waiving of the 10 percent management fee on Lippo
Bank's pretax earnings, effective Sept. 30. This waiver will be
worth at least Rp 680 billion.

* A reduction in the price of Lippo Securities' acquisition of
Lippo Life from Rp 244 billion to Rp 237 billion.

* A reduction in the price of Lippo Life's acquisition of Lippo
Bank from Rp 658 billion to Rp 638 billion.

* An announcement by Lippo Securities of its intention to proceed
with a rights issue worth between Rp 500 billion and Rp 1
trillion within 12 months, allowing the Riady family and the
Lippo Group to plow back the proceeds of the 15-month zero-coupon
notes that it would issue for the proposed restructuring plan.

* An official announcement by the Riady family to commit the
proceeds of the notes under the financial restructuring to
subscribe to the proposed rights issue at Lippo Securities.

* An announcement by the Riady family, Lippo Bank and Lippo Life
to reduce the percentage of "reverse cross holdings" that exist.

"This announcement is a reflection of Lippo Group's efforts to
listen and respond to the views of its independent shareholders
and investors," James said.

The Riady family's move to sell their shares worth almost Rp 1
trillion (US$427 million) in Lippo Group's two major listed
finance companies -- Lippo Bank and Lippo Life -- in the group's
planned internal takeover has received mixed reactions from the
public.

Analysts regard the internal acquisition as the family's way
of cashing out of their controlling stake in the two finance
companies.

The internal takeover plan, which also involves the group's
underwriting and brokerage company PT Lippo Securities, would not
benefit the investing public or minority shareholders, said the
analysts.

The Capital Market Supervisory Agency (Bapepam) said it was
opposed to the massive restructuring plan because cross ownership
and mutual holding practices were not allowed in the Indonesian
capital market.

Under an earlier acquisition plan, Lippo Securities would buy
an additional 27 percent stake in Lippo Life to increase its
stock ownership in the insurance company to 32 percent from 5
percent at present. The deal would be financed by a Rp 100
billion cash payment and 15-month zero-coupon notes.

Lippo Life would then purchase an additional 40 percent stake
in Lippo Bank to increase its share ownership in the bank to 45
percent from 5 percent at present. Additional shares would also
be bought from other companies controlled by the Riady family for
Rp 657.83 billion under a similar payment scheme, in which around
Rp 100 billion would be paid for by cash and the rest financed by
15-month zero-coupon notes.

Lippo Bank already holds a 11.67 percent stake in Lippo Life,
while Lippo Life has an indirect 9.46 percent stake in Lippo
Securities, according to the capital market watchdog agency.
(hen)