Big Indonesian coal deal

Bakrie Group, run by the family of politician and tycoon Aburizal Bakrie, is joining miner Berau Coal with prize asset Bumi Resources in a share swap deal with Vallar, the mining investment fund established by financier Nathaniel Rothschild earlier this year.

Bakrie will gain majority control of London-listed Vallar and rename it Bumi Plc, a symbol of a move that means Indonesia’s biggest coal producer gains a greater share of the global market.

“This is a reverse takeover where the Bakrie Group is regrouping its coal mining assets,” said Norico Gaman, the head of research at Jakarta brokerage PT BNI Securities. “Vallar is only a vehicle for the Bakrie Group to consolidate its assets.”

“Bumi is now aiming to become one of the biggest global players in the coal industry,” Gaman added.

As part of the deal, Vallar will pay $3 billion in cash and new shares to buy a 75 percent stake in Berau and 25 percent of Bumi in its first deal since raising $1.1 billion and listing in July.

“We’ve announced the creation of an Indonesian coal champion ... [that] is going to be the largest supplier of thermal coal to China,” Vallar co-founder Nathaniel Rothschild told a conference call in London.

“This is a business that by 2013 should produce 140 million tons of coal a year.”

Bakrie Group will own 43 percent of Bumi Plc, while 28.3 percent will be owned by existing Vallar ordinary shareholders.

Bakrie & Bros, the holding firm for Bakrie Group, said on Tuesday it swapped 5.2 billion shares in Bumi at Rp 2,500 a share, or a 2 percent discount to Bumi’s closing price on Monday, for new shares in Vallar.

Bakrie & Bros said in a statement it will control management appointments for both Bumi and Vallar.

Bumi already controls 10 percent of the global thermal coal market, while Berau is the fifth biggest coal firm by output in the world’s largest exporter of thermal coal, which is seeing growing demand from utilities in India and China.

Shares in Bakrie & Bros closed 5.3 percent higher, while Bumi and Berau both rose 2 percent, to outperform a broader Jakarta market up 0.5 percent.

Credit Suisse was Bakrie’s sole adviser for the deal