Supreme Court rules for Semen Gresik

Fitri Wulandari, The Jakarta Post, Jakarta

The Supreme Court has ruled in favor of state-owned cement producer PT Semen Gresik (SG) to hold an extraordinary shareholders meeting to replace the board of directors at its rebellious subsidiary PT Semen Padang.

"The Supreme Court ruling says we are allowed to hold an extraordinary shareholders meeting at PT Semen Padang to replace its board of directors and board of commissioners," SG president Satriyo told journalists at a press conference on Tuesday.

"SG still legally owns 99.9 percent of Semen Padang. Therefore, SG has the obligation to improve the performance of Semen Padang," he stressed.

SG is a parent company for two subsidiaries namely Semen Padang (in West Sumatra) and PT Semen Tonasa (in South Sulawesi). The three have a combined production capacity of 17.25 million metric tons, making SG the largest cement maker here, controlling a 45 percent share of Indonesia's cement market.

The Supreme Court's decision might be a light at the end of tunnel for SG which has been mired in conflict with Semen Padang over a government privatization plan.

When question if SG will replace the current Semen Padang with privatization supporters, Satriyo said, "We want to replace it (the management) with business-minded people who will develop the company. Any good development will bring good things for all shareholders."

SG is 51 percent owned by the government, 23.46 percent by the public and 25.53 percent by Mexico's Cemex SA de CV who became SG shareholders in 1998.

The conflict between SG and Semen Padang centered around the latter's rejection of a government plan to sell another 51 percent stake in SG to Cemex.

Since then demands for a spin-off of Semen Padang from SG had been mounting forcing the government to delay the privatization.

Semen Padang has rejected SG's plan to hold an extraordinary shareholders meeting to replace Semen Padang's board of directors and commissioners.

State Minister for State Enterprises Laksamana Sukardi has recently sent a letter to the governor of West Sumatra approving the demand for a spin-off as long as it did not violate the law.

But Satriyo stressed that any decision for a spin-off lies in the hands of SG's minority shareholders including Cemex.

Legislation on limited liability companies and capital market rule that any major corporate action should have approval of minority shareholders.

The spin-off plan is unfavorable as it will not only harm investor confidence but also force the government to set aside hefty compensation for SG's minority shareholders. Semen Padang and Semen Tonasa assets were counted when investors bought shares in PT Semen Gresik.