Monday, June 14, 2010

Bakrie Spin Off Infrastructure Unit Next Year

PT Bakrie & Brothers (BNBR.JK), the holding company for Indonesia's Bakrie family, said it plans to spin off its infrastructure unit with assets of $3 billion, in an initial public offering by early 2011.

Rajawali to list $1 billion plantation assets

Indonesian investment firm Rajawali Group plans to unlock over $1 billion worth of plantation assets through a market listing within a year, and then hunt for coal and gold mines in the country.

Rajawali, owned by Peter Sondakh, one of Indonesia's richest men, is famous among local investors for managing to unlock value by developing companies, and built up a $1.6 billion warchest from asset sales to expand in mining, plantations and property.

"Cash is king. If there are distressed assets we can jump in," Managing Director Darjoto Setyawan told Reuters in an interview on Friday, adding the firm was worried about the potential fallout from euro zone debt on credit liquidity.

The company plans to start planting its 200,000-hectare landbank with palm oil this year, for an investment of as much as $700 million. It has also bought 70,000 hectares in the planned Merauke food estate in Indonesia's eastern Papau province, in which it will invest $400 million to plant sugar.

Indonesia is the world's top producer of palm oil, largest thermal coal exporter, and Southeast Asia's biggest sugar buyer. "Indonesia is the biggest crude palm oil producer so the product is very strategic for us," said Setyawan, adding the company decided to invest in sugar due to high domestic demand.

It aims to list the plantation assets, which could be through an initial public offering or potentially a backdoor listing. It holds a majority stake in restaurant business Eatertainment (SMMT.JK), its only holding among listed Indonesian firms after it fully sold its stakes in cement maker PT Semen Gresik (SMGR.JK) and cigarette producer PT Bentoel International Investama (RMBA.JK) in the past year.

The company has appointed the country's largest lender PT Bank Mandiri (BMRI.JK) as its main bank to provide loans for the Papua food estate project.

GOLD, COAL AND RESORTS

The firm has secured a 35 percent stake in PT Tambang Batubara Bukit Asam's (PTBA.JK) Banko coal mine, because of its purchase of an 80 percent stake in a $1.3 billion railway project to transport coal from the mine in Sumatra island, he said.
Rajawali is now looking for further coal and gold assets, either as greenfield projects or through stakes in existing mines or listed firms. It is already the majority shareholder in UK-listed gold miner Archipelago (AR.L).

"We're also looking at more than 10 coal assets in Sumatra and Kalimantan," Setyawan said, as he sketched out calculations for the value of its Sumatran assets on a white board.

Apart from plantations and mining, the firm plans to buy a hotel in Morocco or Turkey to tap the European tourism market. It already owns hotels in Indonesia, Malaysia and Australia, and could spin off property assets with another IPO.
The moves to unlock value come as Sondakh, 58, plans to retire as CEO in two years, staying on as chairman to oversee Rajawali as a strategic holding firm for its listed businesses.

Setyawan, in an office filled with model airplanes, said the firm has no plans to take part in the planned IPOs of Indonesian flag carrier Garuda or state steel maker Krakatau Steel. Local stock market players often follow the lead of Rajawali, described as a "savvy investor" by CLSA in a recent report.

"Our business model is always to go for a greenfield project, develop it and then we can enjoy the harvest," Setyawan said. From Reuters, 11th June 2010.