Bumi – Are the Bakries about to trump Natty with a cash offer for Bumi Plc? UPDATE

Rothschild and Bakrie

UPDATE – 9 NOV 2012 – Todays announcement of continuing fractious relations between PT Bumi (the Indonesian main co) and Bumi Plc leads me to believe ever more that the only way for the Bakries to cleanly break and shed Natty is to offer cash to the remaining shareholders. Nat doesn’t hold sufficient to block it and so this is my expectation of the next move on the chess board that is currently Bumi.

Given the googly that ol Nat’s thrown the Bakries and Tan with regards to his counter proposal (details not as yet revealed) for Bumi, we have been exercising our mind here at SBM (always a dangerous affair!) and it seems clear to us that the only real way that the Bakries can wrest control of both PT Bumi (probably relatively easy) and Berau Coal (which will be rather more difficult) is to bid for the balance of the shares that they do not own (between them they own just under 50%).

Given the cash cost of some $1.2bn to the Bakries with their current plan to unwind the ill fated transaction, then a bid or tender offer of say 450p would actually cost them less – some $650m less – nearly half the price as they of course already own 47% of Bumi Plc stock with Tan and so this would be a “cash in cash out” situation on this portion of stock. They would also be purchasing their assets back at just over half the price they sold it over a year ago (adjusted for the $386m of net debt in Bumi Plc) – not bad business really!

We detailed in our blog yesterday how the financials play out at present – http://www.spreadbetmagazine.com/blog/bumi-update-the-market-continues-to-leave-the-sweetie-jar-op.html and the value that remains on the table

I personally believe that most shareholders would take 450p and run particularly the recent entrants at lower levels. Food for thought….