In January, the publicly listed coal giant reached agreements to acquire three local mining companies — Dharma Henwa, Fajar Bumi Sakti and Pendopo Energy — for Rp 6.18 trillion (US$525.3 million).
The Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) has started an investigation into the transactions, as they might undermine the interest of minority shareholders, while Bumi also carries significant weight in the stock market.
The focus of the investigation will be on addressing investor concerns that they might be "overvalued and involved affiliate parties".
Against this backdrop, a hearing with the House of Representatives Commission XI on financial affairs had been highly anticipated to shed some light on the issue.
But on Tuesday, just as Bapepam was about to deliver a written presentation on Bumi's case, stating explicitly that Bumi's three acquisition deals required shareholder approval, legislators decided not to proceed with the scheduled hearing.
“We should focus on more important cases, ones that are related with the interest of a lot of people,” said Olly Dondokambey of Indonesian Democratic Party of Struggle (PDI-P), who presided over the meeting.
No other official statements were given for the abrupt cancelation, but two commission members, speaking on condition of anonymity, told The Jakarta Post the decision was made at the request of members of the Golkar faction, the most influential political machine, and the one that holds the most seats at the House.
Bumi is the most prized unit of local investment holding PT Bakrie and Brothers, which is controlled by the family of Aburizal Bakrie, the coordinating minister for social welfare and a longtime key figure in the Golkar Party.
“Bapepam's findings may disrupt a loan settlement process made by the group and will disturb the ongoing acquisition process made by Bumi,” the sources said.
However, another commission member, Rizal Djalil, denied the Golkar faction's involvement in the hearing cancelation.
“We just don't have much time; we will discuss the Bumi case at the next meeting,” he said.
On its prepared presentation, Bapepam wrote that it had categorized Bumi's acquisitions as material transactions, since the total value of the deals was more than 10 percent of company’s revenue and more than 20 percent of its equity in 2007.
Bapepam said Bumi’s revenue and equity in 2007 stood at Rp 23.03 trillion and Rp 12.4 trillion, respectively.
Under existing regulations, any acquisition deal valued at more than 10 percent of a company’s revenue or 20 percent of its equity is considered a material transaction, which requires prior Bapepam clearance and also approval from shareholders.
Bumi senior vice president for investor relations, Dileep Srivastava, rejected suggestions that the deals lacked transparency.
He said the company would continue to follow all regulations and all due necessary processes required as it would wait for formal advice and further details.
Bumi agreed to pay Rp 2.41 trillion for a 44 percent stake in mining contractor Dharma, which, according to Bloomberg, was more than five times the stake’s market value at the time.
It has also agreed to buy a 77 percent stake in Fajar for Rp 2.48 trillion, and 84 percent of Pendopo for Rp 1.3 trillion.
In addition to the high prices, Bapepam has launched the investigation to address concerns that the transactions involved affiliated parties.
Pendopo is 90 percent owned by PT Bakrie Capital Indonesia, while the Fajar Bumi president director is a former analyst at Bumi and its coal-producing subsidiaries.