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.
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