London. Financier Nathaniel Rothschild will abandon his troubled investment in Indonesia’s coal industry, he said on Monday, agreeing to sell his stake in Asia Resource Minerals (ARMS) after securing an improved offer from an Asian bidder.

Rothschild, the scion of the banking dynasty, co-founded one of ARMS’ predecessor companies in 2010 and teamed up with Indonesia’s politically-connected Bakrie family, aiming to tap demand from the southeast Asian country’s infrastructure plans.

However, hit by tumbled coal prices, a series of boardroom disputes and allegations of fraud and corruption, shares in the business — known as Bumi from 2011 — plunged about 90 percent.

More recently, and after the firm was reinvented as ARMS in late 2013, Rothschild has been battling for control of the business with Asian group Coal Energy Ventures (ACE), a vehicle backed by hedge fund Argyle Street Management and funded by Indonesian business conglomerate Sinar Mas.

On Monday, Rothschild said he had agreed to sell his 17.2 percent stake in ARMS to ACE, after the latter raised its offer to 56 pence per share in cash from 41 pence previously. That values the whole of ARMS at more than $200 million.

ARMS traces its roots to Vallar, an investment vehicle Rothschild helped to set up in 2010 and which raised over 700 million pounds ($1.1 billion) in an initial public offering. Rothschild and other members of the management team at that time invested about 100 million pounds in the business.

“There is no suggestion that this is a good outcome for shareholders, but it is the best short-term outcome given the difficulties that ARMS would have faced…” Rothschild said on Monday.

“Investors like myself who believe in the long term future of thermal coal, will now be given the opportunity to re-deploy their capital back into the sector, but this will be our first and last investment in Indonesia’s coal sector”.

Rothschild said last month he was no longer considering a rival bid for ARMS together with Russian partner SUEK.

Sinar Mas has stressed to investors that, as an Indonesian-owned company, it was well placed to take advantage of the country’s push for more local ownership of natural resources.

“We have had to up the offer but Rothschild will exit the company … so I think it’s a good milestone,” said Fuganto Widjaja, the head of the Sinar Mas business involved in the bid.

“It will probably make it much smoother from now on. Maybe in a month or two it will close and hopefully it will be a success.”

ARMS is currently also tangled in a dispute with its former CEO and president of its Berau subsidiary Amir Sambodo, who was removed by shareholders in March but refuses to vacate his position.

Reuters

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London. Indonesia-focused coal miner Asia Resource Minerals, at the centre of a battle for control between co-founder Nathaniel Rothschild and Asia Coal Energy Ventures (ACE), said on Monday that a takeover by ACE was the best option to secure its future.

Asia Resource Minerals (ARMS), previously known as Bumi, has been hit by boardroom disputes and tumbling coal prices, which have sent its share price plunging almost 90 percent since its listing in 2010.

Financier Nathaniel Rothschild offered in November to raise his 18 percent stake, proposing to underwrite a $100 million share sale to help cut debt. But ACE, a vehicle backed by hedge fund Argyle Street Management and funded by Indonesian business conglomerate Sinar Mas, made an alternative offer in May to buy the company, which it values at 98.8 million pounds ($156 million), and restructure its debt.

Complicating the process, however, Britain’s takeover regulator has asked ARMS to appoint an independent adviser to assess the fairness of a separate offer ACE made to Austrian bank Raiffeisen (RBI), which controls a large stake in ARMS, before ACE’s bid can be put to ARMS’ other shareholders.

“If the conditions to the ACE Offer and ACE recapitalisation are satisfied, and they proceed to a successful conclusion, they appear a better option for the company at this stage,” ARMS said in a statement.

The London-listed company urgently needs to restructure its debt as a $450 million bond comes due on July 8. It has also lost control of its Berau subsidiary, which holds its core mining assets in Indonesia.

ARMS said that due to “intermeddling” by its former CEO Amir Sambodo – who was forced to resign in March and who had also been president of Berau – Berau now risks insolvency action and having to suspend some mining operations because it is not able to pay contractors.

Sambodo was removed by shareholders in March but he refused to vacate his position and ARMS top executives have been denied access to head office and limited access to Berau’s IT, accounting systems and bank account information, ARMS has said.

Sambodo says he was forced to resign without reason or warning and contests the decision.

The dispute is causing delays in payments to contractors even though Berau has more than sufficient funds to make such payments, ARMS said.

Reuters

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