Indonesian state-owned mining company PT Antam Tbk announced yesterday that it had selected HSBC as its financial advisor for the potential acquisition of a minority stake in PT Freeport Indonesia, which owns and operates the Grasberg gold and copper mine in Papua.
Antam is considering acquiring the government's 9.36% stake in Freeport Indonesia, which some analysts say is valued at $700 million. HSBC was selected from five short-listed candidates, which had included CLSA, Citigroup, BNP Paribas and Macquarie.
"We have appointed HSBC to investigate whether this interesting investment opportunity will indeed bring significant value for Antam and if so, to recommend how best to accomplish the acquisition," says Dedi Aditya Sumanagara, Antam's president director.
"If it will create significant value for Antam, we will go to our minority shareholders and ask for their required approval. If it will not bring value to Antam, we will abandon the plans."
To avoid a conflict of interest, Antam will have to receive minority shareholders' approval of any acquisition of the government's stake in Freeport Indonesia. That is because Antam's majority shareholder, the Indonesian government, is not allowed to vote on Antam 's acquisition of one of the government's assets.
Antam expects HSBC to complete a due diligence report, make a recommendation whether or not to proceed with the acquisition, and if a positive recommendation, how best to finance the acquisition.
Antam officials added that in order to ensure objective advice, HSBC may not become, nor will have any links to, the financial arranger. If Antam ultimately needs to raise funds, a separate financial arranger will be appointed. The company has said a rights issue is one of the alternatives which may be considered.
As Antam earlier carefully noted in a press release, "Although still at a very preliminary stage and pending minority shareholder approval, there is a possibility the acquisition would be effected through a cashless transaction, wherein the government would transfer its shares of PT Freeport Indonesia to Antam in exchange for newly issued Antam shares."
Freeport Indonesia, which owns and operates large copper and gold mines in Papua, the archipelago nation's easternmost province, is 81.28% directly owned by New Orleans-based Freeport McMoran Copper & Gold Corporation; 9.36% indirectly owned by Freeport McMoran through its 100% ownership of Indocopper Investama; and 9.36% owned by the government.
Antam officials say they are prioritizing the 9.36% stake of Freeport Indonesia owned by the Indonesian government rather than the 9.36% stake held by Indocopper Investama, although both options will be considered as part of the financial due diligence.