Nat Rothschild gives up long battle for Asia Resource Minerals
Nat Rothschild recently completed a masters degree in addiction studies. His attempts to build an Indonesian coal miner over the past five years must have been a rich source of material.
Mr Rothschild doggedly stuck to his belief that a successful, stable venture would emerge from Asia Resource Minerals, the perennially crisis-hit company that launched in 2010 to invest in natural resources.
He remained a key shareholder even after falling out with Indonesia’s Bakrie family, his initial co-investors in what became known as Bumi plc. This year Mr Rothschild launched an underwritten share offer that would have enabled him to regain majority control.
Now the financier appears to have had enough. “This will be our first and last investment in Indonesia’s coal sector,” his holding company said on Monday as it announced it would sell out to a rival bidder.
The rival is a recently formed group, Asia Coal Energy Ventures (ACE), whose main financial backer is Sinar Mas, the business group of Indonesia’s powerful Widjaja family.
Brian Grieser, a senior analyst at Moody’s, the rating agency, said that Mr Rothschild had come up against several of the most powerful Indonesian families. “At the end of the day he was almost forced to sell at this point . . . There wasn’t much he could do.”
The Widjaja pitch to Asia Resource investors was partly that the coal miner needed a strong Indonesian partner — a view that has seemed justified in recent weeks, as the company has in effect lost control of Berau Coal Energy, its remaining operating subsidiary.
Amir Sambodo, Asia Resource’s former chief executive, is defying attempts from London to remove him from his role in Indonesia — a dispute that has forced the suspension of the group’s UK shares.
The events illustrate the corporate governance concerns that have beset Asia Resource, where boardroom changes have been dizzying in number.
The company’s “story . . . has been a very difficult ride for shareholders,” said Hamish Tyrwhitt, Mr Sambodo’s successor and the fifth chief executive of the company’s short life.
Asia Resource struggled to balance life as a UK listed company with an ability to manage events on the ground in Indonesia. Allegations of financial irregularities surfaced in 2012, and the following year the company detailed more than $200m of spending in Indonesia “with no clear business purpose”.
While Mr Rothschild strongly believed the company’s independent directors, including City grandees, could have done more to control events, they hit back by insisting that the banking family scion who did the original deal with the Bakries was part of the problem.
“Nat Rothschild’s time as a director of Bumi was characterised by taking highly confrontational positions that proved counterproductive to addressing the company’s issues,” said Sir Julian Horn-Smith, senior independent director, in 2013, shortly before Mr Rothschild made a failed attempt to oust the board.
This year Mr Rothschild again attempted to regain control, via his recapitalisation proposal, of the much-diminished group.
Monday’s enhanced ACE bid for Asia Resource, now backed by Mr Rothschild, values its equity at £135m, compared with a market capitalisation of more than £3bn at its peak. The ACE 56p a share offer compares with less than 15p before news of its possible offer.
Asia Resource has also been brought low by the price of thermal coal, which has halved since 2011. People close to Mr Rothschild say that he has lost about £80m in his Indonesian investment.
Coal remains under assault because of fears over fossil fuels’ contribution to climate change. The valuations of US coal producers have been crushed: Peabody Energy, the largest, is down 95 per cent since 2011.
Mr Rothshild said that coal could still be a worthwhile investment and on Monday hinted at interest in assets elsewhere, perhaps the US or Australia.
With Mr Rothschild onside, ACE is expected to continue plans to take over Asia Resource, including an attempt to restructure Berau bonds due to be redeemed within weeks.
“From a bondholder perspective there are not a lot of options here at the moment . . . they either take this or they default,” Mr Grieser said. “They have a $450m payment in July, they do not have the ability to pay it from internal sources . . . and they are unable to go out and raise the money in a normal capital market transaction, so effectively existing bondholders are being coerced.”