Nat Rothschild under pressure to give up his mining dream

Oct 12, 2012

Bumi shares leap as Indonesia' Bakrie family propose buying out UK financier from ill-fated mine venture

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BUMI, the FTSE 250 coal miner, is considering a buy-out offer from Indonesia's influential Bakrie family that would in effect unwind Nat Rothschild's ill-fated effort to become a global player in the coal business.

It's not clear whether the indebted Bakrie family have $1.3 billion in cash to do the deal, or if Rothschild will accept it. But he'll be under pressure from City investors to accept.

Rothschild is said to feel the Bakrie offer is an effort to get the company on the cheap, says The Guardian.

But what are Rothschild's choices? The Financial Times calls the deal done by Rothschild in 2011, when the Bakries' coal-mining assets were reversed into his London-list holding company Vallar, "one of the most ill-fated listings on the London Stock Exchange". Shares in the firm have falled nearly 90 per cent from a peak of £14.

But yesterday Bumi's share price jumped 40 per cent on hopes the Bakrie offer would bring a denouement to the saga that's come to epitomise the dangers of investing in emerging market ventures. While investors could come out with roughly one quarter of the value of their investments, the proposal contains a sting in the tail for Rothschild, calling him to surrender £40m in shares he received as a bonus for bringing the Bakries in.

But that loss may be slight compared to loss of reputation. "Thanks for nothing," wrote the Financial Times Lex column today. "Far from leading his backers to the East Indies on an exotic journey of enrichment, Mr Rothschild steered them into a complex web of debt-ridden business and governance mishaps unbecoming of a London-listed company. Now, Mr Rothschild is but an also-ran board member, albeit with a roughly one-eighth interest in the shambles."

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