Spin-off plans remain an option: Semen Gresik
Spin-off plans remain an option: Semen Gresik
JAKARTA (JP): State-owned cement producer PT Semen Gresik said
on Wednesday that plans to spin off its two cement subsidiaries
remain intact, despite the government's consideration of a put
option deal to sell the company for US$520 million.
Semen Gresik president Urip Timuryono said the government may
still divest Semen Gresik's two units, PT Semen Padang and PT
Semen Tonasa, even though the move would annul the put option
deal with the Mexican-based PT Cemex Indonesia.
He said reviews of the implementation of spin-off plans and
the put option agreement were being conducted simultaneously.
"The government and our company are investigating the most
effective solution," Urip said during a public presentation.
State Minister for State Enterprises Laksamana Sukardi said on
Monday that the government would exercise its option rights to
sell Semen Gresik to Cemex.
The government is under pressure to raise Rp 6.5 trillion
(US$730 million) in privatization proceeds this year as part of
reform targets agreed with the International Monetary Fund (IMF).
Thus far, no funds have been raised through privatization and,
with only four month left before the deadline, Laksamana has
expressed concern over meeting the target on time.
Exercising Cemex's put option deal, however, would earn the
government US$520 million.
That price would exchange to about Rp 4.63 trillion at current
rates, or over 70 percent of the government's privatization
target.
The government secured the put option deal with Cemex in 1998,
when the latter entered Semen Gresik with a 14 percent stake.
Under the deal, which expires on Oct. 26 this year, the
government has the right to sell its remaining 51.01 percent
stake in Semen Gresik at a value of $1.72 a share. Cemex must
accept the sale offer at the agreed price.
At present, the Mexican company owns 25.53 percent in Semen
Gresik, 11 percent of which was acquired through the stock
market.
Cemex's three-year campaign to become Semen Gresik's majority
shareholder has faced protests from local people in West Sumatra,
especially those in the capital city of Padang.
According to the locals, Semen Padang was built on their
ancestors' land and should therefore remain under Indonesian
ownership.
Similar demands have been aired by people in South Sulawesi,
who also want Semen Tonasa removed from the Semen Gresik group.
Urip said the government must take such demands into account,
even though conceding to them could jeopardize the put option
deal.
The put option agreement is only valid if Semen Padang and
Semen Tonasa remain subsidiaries of Semen Gresik.
Removing the two units would also require the government to
compensate Cemex for the loss of value in Semen Gresik.
Urip refused to speculate as to whether the government would
consider a spin-off after exercising its put option right.
Cemex said it was prepared to hold talks with the government
regarding the put option agreement.
"The transaction would have a positive impact on the overall
economic environment of Indonesia, fueling the optimism of the
financial and investor community," PT Cemex Indonesia president
Francisco Noriega said in a statement on Wednesday.
Meanwhile, Semen Gresik finance director Satriyo said he
believed that the rupiah would remain strong which would in turn
ease the company's debt burden.
Semen Gresik must repay some Rp 215 billion and another $162
million in U.S dollars by January next year, he said.
Earlier this year, Semen Gresik issued bonds to secure funds
for the debt payment, but then halved the issue due to sluggish
market conditions at the time.
Satriyo said Semen Gresik would make up the shortfall with
loans of up to Rp 700 billion from Bank Mandiri.
Semen Gresik said foreign exchange losses had led the company
to suffer a net loss of Rp 41.4 billion in the first semester of
this year. (bkm).