ING constructs an offer in Indonesia

Komatsu offers 62% premium to buy its unit.

Komatsu Ltd., the world's second-biggest maker of construction equipment has offered to buy the outstanding shares of its unit PT Komatsu Indonesia. If all goes well, it hopes to delist it from the Jakarta Stock exchange in December.

Already, Tokyo-based Komatsu has 68.4% of the Indonesian unit that supplies components to factories that make vehicles used in construction, mining and logging. Komatsu has offered to pay Rp8,500 ($0.87) per share - a 62% premium to the stock's August 10 closing price of Rp5,250.

The offer values the stake at about $106 million. Jakarta-based Komatsu Indonesia asked the exchange to suspend trading of the shares Thursday August 11.

It added, "Our company is the only Komatsu unit outside Japan with shares trading on an exchange. Shareholders who exercise their rights in selling the shares will get an attractive price."

ING is the advisor for the deal. The bank was mandated on the back of two successful privatizations completed in Indonesia - one for Procter & Gamble in 2004 and one for Pfizer in 2002, the later marked the first voluntary delisting in the history of Indonesia's capital markets.

"We believe the price is fair considering the future prospects of the business," says Sheel Kohli, Hong Kong-based spokesman for ING.

Indeed, Komatsu Indonesia's business outlook is bright. Thanks to higher prices of commodities such as coal and nickel, miners are in the market for more heavy equipment.

Coal alone can drive the growth. Indonesia's Ministry of Energy and Mineral Resources estimates the country's coal resources at 36.3 billion tones.

Following the 13% compound annual growth rate over the past seven years, UBS Investment Research analysts predict Indonesia's coal production will increase another 9% annually over the next five years.

Such growth will foster expansion - and the need for construction equipment from the likes of Komatsu Indonesia.

This has been evident in the unit sales of construction equipment for three-month period ended June 30, which increased were Rp618,231 million, an increase of 88.3% from Rp328,366 million in the same period a year earlier. The unit plans to hold a shareholders' meeting on Sept. 21, while the tender offer will be from Oct. 20 through Nov. 28