Peace could be about to break out at Bumi, shares rocket

Indonesia-focused mining giant Bumi has received a proposal from major shareholder, the Bakrie Group, which wants to swap its stake in the group for a stake of equivalent value in Bumi Resources.

The Bakrie Group indirectly controls 23.8% in the London-listed group, and has proposed that this be cancelled, in exchange for a 10.3% stake in Bumi Resources, Bumi's Indonesia-listed affiliate which is under investigation for alleged financial irregularities.

In addition, the Bakrie Group has made a conditional proposal to buy back Bumi's remaining 18.9% shareholding in Bumi Resources for cash before Christmas 2012.

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The Bumi board is considering both proposals.

The Bakrie Group has further made a conditional proposal to make a cash offer within the next six months for Bumi's shareholding in Berau Coal Energy, which represents around 84.7% of the issued share capital of the fifth largest coal producer in Indonesia.

The proposals could bring to an end fractious relations between the Bakrie family, one of India's wealthiest and most influential families, and another of the firm's original backers, financier Nat Rothschild.

Shares in Bumi have lost three-quarters of their value over the last year on concerns over corporate governance, not to mention the extensive debts the Bakrie family have run up.

Bumi, founded by Nathaniel Rothschild, revealed on September 24th that it had begun investigating "potential financial and other irregularities" relating to Bumi Resources.

The FTSE 250 company was brought to the UK market by means of a so-called 'cash shell', then called Vallar, in 2011 by Nat Rothschild. At their peak, the shares were worth 934p each.

The collapse in the share price has reportedly incensed Samin Tan, the business tycoon who rescued the Bakrie Group when he invested $1bn in Bumi in return for a 47.6% stake split evenly between Tan and the Bakries.

The whole saga has played out like an episode of eighties glossy soap-opera Dallas; the latest proposals look like the first step in an attempt to bring an end to the soap opera.

JH