Home > Market change > Vallar poised to raise Bumi Resources stake

Vallar poised to raise Bumi Resources stake

April 7, 2011

“Vallar is moving ahead with plans to expand its stake in Indonesia’s biggest coal company, as its metamorphosis into a sizeable miner gathers momentum. The London-listed cash shell founded by financier Nat Rothschild stands to gain an indirect controlling stake in Kaltim Prima Coal mine – the world’s largest thermal coal mine – by increasing its shareholding in Bumi Resources, which operates the mine, to 51 per cent later next month.

Bumi Resources, the coal miner owned by Indonesia’s Bakrie family, has a majority stake in KPC, according to the company’s website, while India’s Tata holds 30 per cent. Andrew Beckham, chief financial officer of both Bumi Resources and Vallar, said he expected the Bakries to approve a plan to increase Vallar’s 25 per cent stake in Bumi Resources via a share swap expected in May. However, in an e-mail, he hinted at uncertainty as to how the transaction would occur.”

Source: Financial Times, April 6 2011

Observations:

  • The proposed share swap between Bumi and Vallar will give the Bakrie family a majority share of Vallar, but the family will not have the majority of voting rights. In return Vallar, by owning 51% of Bumi, will gain control over the assets of the group, which will then be renamed Bumi plc.
  • Vallar was created last year and listed on the London Stock Exchange in July. After the transactions in Indonesia, which will be completed with the share swap discussed above, the company aims to expand the portfolio with other areas of the world. In January the group was reported to be in the market for $1bln coal assets in America or Australia, but this deal did not yet materialize.

Implications:

  • In order to grow further into a FTSE100 coal player the company needs to find assets that can be managed in clear synergy with the Indonesian assets. Total acquisition value the founders were looking for was up to $7.5 bln, of which less than half has been spent so far. Cheap debt helps the company to achieve high gearing in acquisitions.

©2011 | Wilfred Visser | thebusinessofmining.com

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