Bumi should never be created. Maybe the best plan is to turn what's left into cash even if some shareholders lose out
It would be better for everybody shareholders, the battered Nat Rothschild, the embarrassed non-executive directors and the London Stock Exchange – if Bumi had never been created. This ridiculous adventure into Indonesian coal mining via a partnership with the unpredictable Bakries has been a disaster. Is the best thing now to turn what's left into cash and end the miserable tale?
That's what the Bakries themselves are suggesting via a proposal that, as ever with Bumi, is less than straightforward. In three stages, the Indonesians would buy the assets for $1.2bn in cash plus the cancellation of their 23.8% stake in the London-listed company.
They also suggest that Rothschild and his co-founders should surrender their 6.6% holding on the grounds that the stock was a reward for doing a deal that would now be unwound. That's a neat touch – shoving an extra helping of financial pain on to Rothschild.
The net result, according to calculations by Barclays' analysts, is that Bumi would be left with 483p a share of cash. So shareholders who piled into Rothschild's cash shell at £10-a-pop two years ago, in the hope of a quick profit, would lose slightly more than half their investment. That's not great, but it's better than the 185p at which Bumi shares were trading before today, dragged down by last month's revelation of "potential financial and other irregularities" in the Indonesian operations. The response to the Bakries' proposal was a jump in the price of Bumi shares to 260p.
The gap from the theoretical 483p says the proposal is sketchy. Indeed it is: the Bakries don't say how they would finance the deal. And are all parts of the transaction conditional on each other? Bumi shareholders would probably welcome a parting of the ways with the Bakries, which a disposal of the 29% holding in Jakarta-listed Bumi Resources would achieve. But they might wish to persevere with Berau, where their 83% holding implies control, the quality that has been in shortest supply all along.
The best policy for the independent directors on the Bumi board led by worthies Sir Julian Horn-Smith, Lord Renwick and Sir Graham Hearne is to treat the proposal seriously. If there is a realistic prospect of getting 483p – and that's a big "if" – most original investors would probably be happy to take the loss. And Rothschild, one hopes, would do the decent thing and give up his bonus shares.