Down to the wire for Salim Assets

PT Holdiko Perkasa is racing against time to finalise asset sales before the year-end deadline.

PT Holdiko Perkasa, the holding company for expropriated Salim Group assets under the Indonesian Bank Restructuring Agency (IBRA), is racing to finalize sales and initial public offerings by end December.

According to Irawati Koswara-Simms, vice president of investor relations at Holdiko in Jakarta, the company’s target under Indonesia’s letter of intent with the International Monetary Fund is Rp5.2 trillion ($563 million). So far this year only a little over Rp1 trillion has been raised, she adds, but a final flurry of activity in the next few weeks should see enough deals to put Holdiko over the target.

Most contentious is the disposal of PT Indomarco Prismatama, also known as Indomaret. This mini-mart retailer – a local version of 7-11 – has been slated for IPO by Bapepam, the securities regulator. Generally IPOs are favoured over strategic sales because they put assets in the hands of the Indonesian public, not other secretive tycoons, and the sales process is transparent. Against this, however, is the important question of expediently raising funds for the cash-strapped government.

Although Indomaret is still on schedule to IPO 22-24 November and list on the Jakarta Stock Exchange 13 December, a strategic buyer, the Sampoerna Group, is bidding to buy the entire company for around Rp300 billion, which is a little more than Holdiko expects it can raise on the stock market by selling its 51% stake, roughly 46 million shares. The company’s unaudited December 1999 sales rose nearly 50% from 1998 to Rp595 billion, with an EBITDA of Rp20 billion.

Given the impending IPO schedule and 31 December financing target, Holdiko will have to decide in the next week or so what course to take, says Koswara-Simms.

The obvious question is whether Sampoerna is in cahoots with the Salim Group. The question arises with every strategic sale Holdiko makes: “You can link all the conglomerates to one another through some kind of business,” Koswara-Simms explains. “For example, Sampoerna owned Indofood [another Salim business] shares.” There may be more to this deal than collusion, however. Sampoerna has a real business interest in Indomaret. Sampoerna owns a rival company, Alfa Mini Marts, which is listed on the Jakarta Stock Exchange, which has about a quarter of Indomaret’s outlets. Buying Indomaret would allow it to absorb its biggest domestic competitor.

In addition, in this particular case there could be a corporate governance benefit to selling to Sampoerna. The Salim Group still owns 49% of Indomaret. An IPO would give Salim effective control; and Salim could get a crack at buying its own shares cheaply. While the problem of collusion looms large, a sale to Sampoerna could be in the Indonesian public’s best interest.

There are a number of other deals nearing decisions, says Koswara-Simms. Most important are the Salim plantations which produce palm oil, the crown jewel of the Holdiko assets. Bids from six final bidders are expected by the end of next week. Goldman Sachs is advising the government. Also, bids are due next week for Salim Oleochemical, and a final shortlist of six bids from both foreign and domestic potential investors have this week been closed for Mosquito Coil. These deals and others must be processed and finalized in the next few weeks.

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