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)