Scion of banking family is understood to believe that Bakrie family’s proposals are attempt to circumvent takeover rules
London financier Nat Rothschild is preparing to increase tensions with Indonesia’s powerful and controversial Bakrie family by fighting a proposal to sever their embittered tie-up at Bumi plc, the London-listed mining investment vehicle they co-founded two years ago.
It is understood that the scion of the banking family believes a deal proposed by the Bakries is an attempt to acquire Bumi’s assets on the cheap – a view which emerged after a day in which the proposal caused Bumi’s flagging share price to jump by 40% on hopes of a settlement.
After months of feuding, the politically-connected Indonesian mining family said it would offer $1.29bn of cash in return for Bumi plc’s mines and for cancelling its own shares in the London-listed investment vehicle.
The Indonesians also spiced up their proposal with a separate suggestion that Rothschild should give up a stake in Bumi plc worth upwards of £40m. The announcement came after the London-listed group launched an inquiry last month into allegations of wrongdoing at its Indonesian coalmining operations, including PT Bumi Resources, one of the Bakries’ most prized holdings in which Bumi plc holds a 29% stake.
Shares in Bumi plc, which have crashed since floating at £10, gained more than 40% on the news to 261.55p, suggesting shareholders would welcome selling out at less disastrous terms than feared.
One major investor told Reuters: “We are disappointed because there are some absolutely fantastic assets in Indonesia. The current proposal, if the Bakries have the money to go through with it, would lead to potential return of just under £5 a share. That is a disappointing outcome, but it is not as catastrophic as it was.”
However, despite the share price leap, Rothschild is understood to believe that the announcement is a cynical tactic by the Bakries, who have hired Ian Hannam, the banker who suggested the original deal to Rothschild, as their main adviser. The British financier is understood to be telling his inner circle that the Bakries’ proposal would circumvent takeover rules as Bumi plc shareholders Rosan Roeslani, who holds 13%, and Samin Tan, an Indonesian billionaire who pulled the highly indebted Bakries back from default last year with a $1bn investment, have close ties to the Bakries. Tan, however, is said by many to have fallen out with the family.
In an official statement, Rothschild said: “Even if the Bakries exit, one of the key concerns that I share with other minority investors is that Bumi plc would still face a concentration of ownership by a small number of closely-related parties and such challenges would remain.”
A deal is not agreed. Bumi plc said it was consulting shareholders before making any decisions, while analysts questioned how positive shareholders would eventually be.
The Bakries’ complex proposal involves the family cancelling its stake in Bumi plc in exchange for buying back the London-listed vehicle’s stake in the family’s mine. The Bakrie family could then buy Bumi plc’s entire 84.7% stake in another Indonesian coal asset, Berau, for $946m.
David Butler, a mining analyst with Barclays, said: “I think it is highly unlikely that it will go through in all phases, as shareholders will want to retain exposure to coal. But I can see the sense in the first two steps if the Bakries’ influence [in Bumi plc] is removed.”
In 2010 Rothschild listed a cash shell called Vallar – which was then renamed Bumi plc after its most important asset – to acquire mining assets in emerging markets. His sales pitch to investors was that he would bring western standards of corporate governance to otherwise risky investments. However, the weakness in his argument – that Bumi plc did not hold a controlling stake in its most important asset – was very quickly exposed and the relationship between Rothschild and the Bakries became irreparably soured.
If the Bakries’ proposals are accepted, it would leave Bumi plc as a shell with no assets other than $1.29bn in cash. Analysts said the cash would then probably be returned to shareholders and Bumi plc wound up.
• New even more lucrative TV deal runs 2013-16
• Richard Scudamore presents options to clubs at meeting
The Premier League is considering the introduction of rules to control escalating player wages before the huge influx of cash from the next television deals in 2013-16. Potential rules presented to the clubs by the chief executive, Richard Scudamore, at a meeting in London on Thursday include a salary cap or a form of Uefa’s financial fair play rules.
Some clubs feel strongly that the new TV deal, with £3bn already secured from the UK rights, should not be swallowed up by a new wave of pay inflation. But any rule change requires 14 of the 20 Premier League clubs to agree and it is not clear whether sufficient clubs will be in favour of strengthening financial regulations.
Manchester United and Arsenal, both of whom made profits in 2010-11, are understood to favour rules similar to Uefa’s, which require clubs to move towards breaking even financially, not making losses. On Thursday Arsène Wenger supported that view, the Arsenal manager saying: “You should just get the resources you generate, that will determine the real size of the club.”
However, some clubs see that as a move by the two with the greatest income to outspend everyone else. Manchester City, whose path to becoming Premier League champions has been achieved by the club’s Abu Dhabi owner, Sheikh Mansour bin Zayed al-Nahyan, subsidising huge losses, are thought unlikely to support new regulations, even though they have consistently said they are aiming to break even. City argue that a level of investment by an owner to bankroll losses is necessary to lift a club to success on the field and commercially.
Other clubs, including Fulham, Everton, West Bromwich Albion, Newcastle and Tottenham Hotspur, are also understood to question whether clubs need new regulations, rather than being trusted to manage their own affairs.
Despite income rising every year, pay to players has risen steadily over the past decade. In 2001-02, clubs spent £1.1bn, 62% of their income, on players’ wages. In 2010-11, the most recent year for which financial figures are available, income grew to £2.5bn but players’ wages amounted to £1.8bn, 70% of the clubs’ turnover. Despite massive commercial growth and the Premier League’s growing popularity abroad, only eight of the 20 clubs made a profit in 2010-11.
West Ham United’s chairman, David Gold, is vocally in favour of introducing rules to limit wages to help clubs make a profit, as is Dave Whelan, the Wigan Athletic owner. Peter Coates, the Stoke City owner, said all clubs would be helped by having to conform to agreed rules.
“I hope this view is widely shared: we cannot have all the new money going in inflated wages and payments to agents,” Coates said. “There is no need to do that; we will have the same players, they won’t get better because we pay them more. It should not be beyond us to find a formula which works for us all.”
Ellis Short, the owner and chairman of Sunderland, who lost £8m last year having spent 77% of the club’s income in wages, is understood to favour restricting salary increases to 10% in each of the new TV deal’s three years.
The clubs have agreed to work on the proposals in two separate groups of 10, then for all 20 to meet to consider the issue in detail at the end of September. The Premier League did not want to comment in detail until further work has been done; a spokesman confirmed: “There is a process under way to examine potential further financial regulation.”
Royal Bank of Scotland is understood to be facing investigations into whether it has broken economic sanctions against Iran.
View original post here: RBS may face sanctions inquiry
Europe’s watchdog concerned that proposed $1.9bn takeover of EMI would create a behemoth with undue market power
Universal Music – home to Rihanna and U2 – has been told by the European Commission to offer additional concessions if the world’s largest music company is to have a chance of winning regulatory approval for its £1.2bn ($1.9bn) purchase of EMI.
The failure to win over Brussels quickly takes Universal, owned by French company Vivendi and run by Briton Lucian Grainge, closer to the point where it will be forced to hand over £1.2bn to EMI’s owner Citigroup – without necessarily having won the regulatory approval it needs to complete the transaction.
It is understood that the EC rejected Universal’s initial package of proposed divestments, which would have resulted in it offloading Virgin Records, home to the Spice Girls, and other smaller parts of its artist roster and recorded music catalogues to win approval for the purchase.
Earlier this week, Richard Branson, who owned Virgin Records until he sold it to EMI for $1bn in 1992 indicated that he could be interested in taking control of the unit in partnership with one time business colleague, Patrick Zelnick, from Naive Records of France.
Taken together, Universal Music and EMI would account for about 40% of the music sold worldwide, in a market with only two other significant players, Sony Music and Warner Music. With such a large market position in prospect, the takeover has been scrutinised by the EC and the Federal Trade Commission in the United States.
Had the EC been sympathetic to Universal’s initial offer of divestments, the regulator would have informally sounded out third parties in the industry, a process known as “market testing”. But it is understood that the commission this week declined to market test the package that was on offer, prompting Universal to consider more sales of record labels or its catalogue.
Universal had hoped that it would meet an EC deadline of this week to begin the market testing process, which in turn would have given the French owned music group a chance to win regulatory approval for the EMI buyout before Brussels shuts down for the summer. However, the commission may now chose to extend its delibrations into September, creating a further headache for parent company Vivendi.
When Universal agreed to buy EMI from Citigroup in November of last year, owner Vivendi agreed that it would pay Citigroup £1.2bn 10 months later, regardless of whether it had won regulatory approval.
The deadline passes in mid-September and in theory Vivendi will have to hand money over to the US bank, although it is understood that the payment could be delayed for a period if negotiations in Brussels were close to reaching a conclusion. Citigroup ended up owning EMI after it decided to foreclose on its loans to Guy Hands’s Terra Firma, after it concluded that EMI under Hands could not handle its debt load.
The prospect of handing over £1.2bn to Citigroup is particularly embarassing for Vivendi at a time when the French the future direction of the media and technology conglomerate is uncertain following the ousting of group CEO Jean-Bernard Levy. Vivendi has been conducting a strategic review, under chairman Jean Rene Fourtou, which has led to contemplate possible sales of some business units, including its majority shareholding in Activision, the computer games developer, and its Morroccan telephone business.
Negotiations between the EC and Universal are understood to be continuing.
Jeremy Hunt’s former special adviser Adam Smith faces further grilling over his role in News Corp’s bid for BSkyB
• Jeremy Hunt’s former special adviser, Adam Smith, tells the Leveson inquiry that the cabinet minister and key Department for Culture Media and Sport officials knew of his contact with News Corporation over its BSkyB bid.
• Smith said he regretted the “perception of collusion” with News Corp over the bid.
• He said Hunt assured him over evening drinks he would not have to resign over the Frédéric Michel emails, then the following morning told him: “Everyone here thinks you need to go.”
• Smith said he would not have been as strong as Hunt in the outspoken memo to the prime minister in support of BSkyB bid.
• David Cameron has said he stands by his decision to give Hunt quasi-judicial oversight of the deal, despite the controversial memo.
• Metropolitan police have arrested a 37-year-old woman, understood to be a News International journalist, over alleged inappropriate payments to public officials.