Salim's Indofood deal 'indicates its inconsistency'

JAKARTA (JP): Salim group's plan to sell Indocement Tunggal Prakarsa's 50.1 percent share of Indofood shows inconsistencies in the group's restructuring program, securities analysts said.

Sigma Research Institute head Jasso Winarto said here yesterday that the sale plan proved the group's restructuring program did not give "a good synergy and profit result".

"It is obvious that the latest business move was made to mend the group's previous restructuring phase," he told The Jakarta Post.

But he said the move would be good for the group's future business activities especially when the free trade arrangement in the region begins in five years.

Salim group announced Tuesday it would sell Indocement's 50.1 percent stake in Indofood Sukses Makmur, the world's largest noodle maker, to Singapore's QAF LTd in which it has a 70 percent stake for Rp 4.68 trillion (about US$1.95 billion).

The transaction will make Indofood a part of the Singaporean food and bread maker.

Under the proposed deal, Indocement, the country's largest cement producer would lose its most lucrative business division. In 1996, Indofood's contribution to Indocement's revenue was 75 percent.

Salim group owns more than 60 percent of Indocement and Indofood.

Salim group's restructuring program began in 1992 when Indocement bought 51 percent of Indofood and Bogasari Flour Mill, the country's largest wheat producer. In 1995 Indofood bought Bogasari from Indocement. In March this year Indofood bought Salim group's other food-related affiliates, turning it into the only food division of the Salim Group.

Jasso said that with the latest move, the Singapore-based company would operate as the holding company for all the Salim Group's food-related companies.

He said the change would give Indofood more exposure to international business players. "This will, for example, give Indofood easier access to overseas loans," he said.

But many analysts criticized the group's plan to "relocate" the giant food operation's headquarters.

"As an Indonesian, I think allowing Indofood to become part of a Singapore company is not really fair," one analyst, who did not want to be named, said. "You see QAF, the Singapore-based firm is relatively much smaller than Indofood in terms of assets," he added.

Jaso said that Indofood's holding company was being changed for business and "other factors".

He did not say what he meant by "other factors" but other analysts said there were "strong political considerations" in the proposed deal.

"By becoming part of a foreign company, some of its profits will go overseas," he said. "It means that you will have much more freedom to use them outside the nation," he added.

Salim group is not the only company to take such a step.

Sinar Mas group and Raja Garuda Mas group have made similar moves, opening big companies overseas to control some of their Indonesian operations.

Sinar Mas group's Asia Pulp and Paper Co Ltd, based in Singapore, has a controlling stake in PT Pabrik Kertas Tjiwi Kimia and PT Indah Kiat Pulp and Paper.

Raja Garuda Mas' Asia Pacific Resources International Holdings, listed in New York, is also based in Singapore and has a controlling stake in listed pulp and paper firm PT Inti Indorayon Utama.

"Indonesia's social and economic gap is grows in proportion to the growing wealth of the rich conglomerates," one analyst said. (aly)