A frenzy of deal-making has broken out in Indonesia as corporates rush to unload their stakes in everything from property and industrial subsidiaries to banks and finance companies in the wake of the currency and stock market crisis.
Assisted by a lifting of all restrictions on foreign ownership of listed companies, indebted companies are seeking out investors overseas as well as conducting fire sales locally to shed unproductive assets.
The government has reactivated its privatization programme while the list of companies planning to launch IPOs – at virtually any price – is growing daily. Sales of stakes in companies by private arrangement are going ahead at a cracking pace.
At the consumer level, Indonesians are being offered deals at 50% off the price and the financing cost for everything from clothes to cars and from apartments and villas to overseas holidays.
Topping the list of the deal-makers are members of Indonesian president Suharto’s family and his close business associates. Demonstrating business savvy, creativity and marketing ingenuity that nobody was quite sure they had, these individuals are out in front in the race to grab whatever investable funds are still available in the region.
Youngest Suharto son Tommy – whose national car project in collaboration with bankrupt South Korean car maker Kia has been both a stumbling block in Indonesia’s negotiations for an IMF bail-out and a failure in business terms – has been the first to try to raise cash. He has launched an IPO for his Humpuss Intermoda Transportasi, an oil products transport group that qualifies as a nice little dollar earner generating profits of around $10 million a year.
A Japanese partner has been enticed into a partnership in Tommy’s $1.6 billion hotel, villa and golf course development on the island of Bali, while negotiations are continuing for the sale to foreign investors of a stake in his Mobisel cellular telephone company. Not much has yet been heard about plans for his poorly performing airline Sempati, which suffers from financial losses and concerns about the safety record of its services.
Suharto’s daughters, Tutut and Titiek, have also been quick to react to the crisis. Tutut offloaded a chunk of the shares in her loss-making television network to privatized local telecom company Indosat. Spotting a buying opportunity, she later picked up a stake in a small toll-road company which neatly complements her main construction business.
Tutut also gained management control of Steady Safe, an overleveraged long-term partner in various transport projects which has the saving grace of good cashflow from its bus and taxi services.
The president’s second-youngest daughter, Titiek, who has succumbed to the attractions of investment banking, listed one of her financial services companies last month and has announced a planned IPO for a second.
Second son Bambang is also in search of foreign funds. He is negotiating to sell for $225 million a 25% stake in Komselindo, his analogue cellular telephone company. His digital telephone company Satelindo, worth more than $1 billion, will go public as soon as possible. He has also needed a quick sale of the stake he and a colleague bought in Singapore-listed engineering firm Van Der Horst using borrowed funds which have now been withdrawn.
Into the breach stepped Edwin Soeryadjaya, scion of the family which used to own Indonesia’s flagship motor company, Astra International. The family lost the company during the country’s last recession, when Edwin’s brother, Edward, brought the family almost to ruin when his Summa group went bust. Edwin has since rebuilt a telecommunications business worth $350 million, part of which he plans to inject into the Singapore company to create a backdoor offshore listing.
Special vehicles in Singapore are becoming increasingly popular for ethnic Chinese businessmen in Indonesia, especially those close to president Suharto, who, at the age of 76, may be nearing the end of his 30-year rule. The giant Salim group, Indonesia’s largest conglomerate, with major businesses in China, Hong Kong and the Philippines, plans to inject Indofood, one of its main Indonesian companies, into a Singapore-listed vehicle, QAF. The $1.7 billion deal will provide a $560m boost to the coffers of the owning family, provided minorities agree to take considerable losses following the fall in the value of the rupiah.
Salim also plans to inject Indomobil, its $1.2 billion car assembly and distribution company into a small Jakarta-listed shoemaking subsidiary and intends to take its Bank Central Asia – the country’s largest private bank – public early next year. But Salim’s manoeuvres are not meeting with much enthusiasm. “There’s no consideration for minority shareholders at all,” says one foreign broker.
To most Indonesians all these deals smack of capital flight, even though locally owned companies such as the Bukaka group are also planning to access the Singapore market for funds, in this case for a $450 million company which builds toll roads in Indonesia.
Another Singapore-linked deal involves the Napan group, controlled by Henry Pribadi, a businessman who has strong connections with the Suharto family and the Salim group. In a complicated deal organized by ING Barings, Pribadi’s Singapore-based company, Econ International, will for about $85 million gain control of two Indonesian companies, a telecommunications company and SCTV, a broadcaster, which are currently owned by Pribadi and others.
Napan has already offloaded an interest in its listed Indonesian packaging firm, Argha Karya, to a German buyer for Rp60 billion ($17 million) to raise funds to pay its short-term debt and has sold a $65 million stake in its tyre-cord company Branta Mulia to US chemical giant DuPont.
No stranger to the Singapore corporate scene, Pribadi is the former owner of the bankrupt Amcol Holdings which was taken over by Indonesia’s second-largest conglomerate Sinar Mas a few months ago after a fraud inquiry.
Much of the deal-making to come could be in property – where 100% ownership is now allowed for listed companies – and in the distressed banking sector.
Bank of Nova Scotia has already bought a 35% stake in second-tier Bank Arya for $45 million from the Ongko group. Meanwhile, the Modern group is hoping to sell a stake in its property company to Singapore’s Keppel Group and is in negotiation with other foreign companies that are interested in buying its bank. Keppel, among others, is busy marketing safe-haven office and apartment suites in Singapore to rich Indonesians, many of whom still have plenty of money to spend.
The beleaguered Bakrie group has launched a large asset shuffle in its finance and property arms after being forced last month to provide sceptical investors with an audited breakdown of its foreign debt showing hedging arrangements. If successful Bakrie’s restructuring will inject a major Jakarta development of 15 condominium towers into a listed vehicle, making it easier to sell. It will also prop up Bakrie’s banking and finance companies through a separate rights issue.
The rush to raise funds, rejig assets and invite foreign partners to inject capital is just the right cure for Indonesia’s problems, brokers’ analysts say. They contrast the fast footwork of Indonesia’s companies with the political bickering that has plagued Thailand and the general denial of the true scope of economic problems in Malaysia.
“In this crisis, the quick and the creative will survive,” says one dealmaker. Now on its fifth crisis in 20 years, Indonesia has already got the message. Maggie Ford
