The controversial Nathaniel ‘Nat’ Rothschild has been setting his gaze into the lucrative and promising local coal industry. The 39-year old Zionist and member of Europe’s Rothschild banking dynasty has recently tied up with Aburizal Bakrie, a disliked tycoon and political figure who owns companies within various local industries. Rothschild is set to finally tap the potential of coal mining in the region through the deal.
For quite some time, a huge bulk of thermal coal exports going to bustling China and India industries has been coming from the country. The Bakrie Group’s coal operations dominate this trade as it owns many of the most productive Indonesian coal mines. Such mines also take the advantage of being situated in strategic locations that easily facilitate short transportation of coal through sea vessels.
Bakrie Group’s mines easily became the focus of Mr. Rothschild’s attention. For several months now, he has been looking at different markets across Asia to find coal assets that he could acquire. Apparently, this business goal is one of his efforts for more profitable diversification. But this foray into Indonesian coal is hardly welcomed by many Indonesians, especially those who prioritize ethical business practices.
The complex deal
Mr. Rothschild’s entry into the Indonesian coal business is not simple. But interestingly, he still goes for it. In November last year, he agreed to buy interests in two of Bakrie Group’s coal operations. The investment would be coursed through his London-listed capital venture Vallar. As part of the agreement, Vallar would be subjected to a reverse takeover by a holding company owned by the Bakrie Group, which in turn is partnering with Recapital Advisors, another local business to fund the effort.
The reverse takeover would involve swapping of up to $3 billion worth of cash and shares. As part of the deal, Vallar would be renamed as Bumi PLC. Its control would also be transferred to Bakrie Group, which would appoint the investment firm’s new officers. In turn, Vallar would own 25% and 75% of Bakrie’s Bumi Resources and Berau Coal, respectively. Bumi Resources is the country’s biggest coal producer while Berau Coal is the fifth.
What both parties would gain
Mr. Rothschild, always opportunistic in his ways, seems to be confident about the advantages he would mostly gain from the deal. He was quoted as saying that his foray into Indonesian coal would enable his business to access a great supply of highly in-demand coal. He is also apparently certain that the new business alliance would get him to the doorsteps of other businesses in other industries where Bakrie Group has a strong influence and presence. That may mean a growing presence of Mr. Rothschild in the country, an occurrence that may not leave a good taste to Indonesians’ mouths.
For the Bakrie Group, the partnership would provide additional global prestige and easy access to capital especially from foreign investors. Some analysts also assert that the transaction would help the conglomerate rise from the depression that almost left it ruined since the 2008 global economic crisis. There are speculations that the partnership may help Mr. Bakrie fund his expensive presidential bid in 2014.
Mr. Bakrie is currently one of the most controversial and influential people in Indonesia. He is one of the potential candidates for the next presidential elections who have been openly expressing their ambitions. Win or lose, analysts and business observers are certain that he would remain as among the most influential tycoons in Indonesia. This obviously means a lot to Mr. Rothschild. Logically, they are birds of the same feather who are now flocking with each other.
With the possibility of Bakrie being elected as President of Indonesia in 2014 (although highly unlikely in my opinion), there is a good chance that doors will be open wide for Rothschild to have bigger influence or power in Indonesia’s economy. What would be of Indonesia?