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November 13, 2008

Northstar to buy Bumi despite share price drop

Private equity firm Northstar Pacific will go ahead with its planned acquisition of a 35 percent stake in Indonesian coal miner Bumi Resources Tbk, despite a sharp fall in Bumi's shares, Reuters reported, quoting a local newspaper which cited the head of Bumi's main shareholder.

Investor Daily on Thursday quoted Indonesia's chief social welfare minister, Aburizal Bakrie, whose family controls Bumi through the holding company PT Bakrie & Brothers Tbk, as saying there was no price renegotiation with Northstar.

"There is no renegotiation with Northstar and they will buy shares in Bumi Resources," Bakrie said.

Bakrie's public comments are rare as he has repeatedly said he is no longer involved in the business since assuming his government post and his brother, Nirwan Bakrie, runs the business.

Bakrie & Brothers said earlier this month it agreed to sell its 35 percent stake in Bumi for $1.3 billion to Northstar to pay off debt, but some analysts have said a recent slump in Bumi's stock price threatens to unravel that deal.

The deal with Northstar values Bumi at $3.7 billion, while the market value of the coal firm has dropped sharply to $2.2 billion.

Bumi shares have dropped by nearly 10 percent each day since a month-long trading suspension was lifted last week. The stock has plunged 85 percent since a mid-June peak.

Bumi is the crown jewel of the Bakrie group, whose interests stretch from property to palm oil. But the group borrowed heavily using Bumi shares as collateral, forcing it to look for a sale when the shares fell as the commodities' bubble deflated.

Philippine conglomerate San Miguel Corp has said it plans a rival bid for 51 percent of Bumi, offering Bakrie a buyback option on up to 49 percent of Bumi in five years.

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