Bumi plc was created in 2010 when Nat Rothschild, descendant of the founder of the two-centuries old banking empire, used his family name to get high profile investors to back him in a deal to bring a chunk of the vast business interests of the Bakrie family of Indonesia to the City of London.
Rothschild used a cash shell, Vallar, to list the coal and other mining interest in London which provided the members of Sumatran family – one of whom, eldest brother Aburizal, has a good chance of becoming president of the world’s fourth most populous nation – a high profile in the West.
At the same time the deal gave Nat, 41, the chance to finally transform his popular image from that of a partying rich kid into a financier with true dealmaking chops.
But only two years later, Bumi plc is collapsing amid bitter recriminations between the Rothschild and the Bakries, a probe by the UK market regulator, allegations of financial impropriety, email hacking and disastrous derivatives trades.
Both parties have put together deals to dismantle Bumi Plc that have gone nowhere. Nat Rothschild is no longer on the Bumi Plc board and its CEO, a Bakrie representative, stepped down in December.
Everything will come to a head on February 21 when shareholders will vote on a proposal by Rothschild supported by Robert Friedland, the legendary mining financier, to throw out 12 of the 14 Bumi directors.
London’s Financial Times is scathing in its reading of the saga:
The long-running and acrimonious set-to at Bumi is hardly likely to enhance the broader Rothschild brand. Rothschild Group, the bank now owned by the French branch of the family, is advising the board of Bumi. It is a telling piece of dissociation, although Lord Jacob sold his stake decades ago after a family spat.
His son still wants a chance to atone for reversing tangled Indonesian coal assets into Vallar, a London shell.
Veteran fund manager Cato Stonex has meanwhile aptly likened the repercussions of the Bumi float to the Guinness share support scandal in the eighties. Afterwards, City practices that had seemed prosaic became unacceptable.
The UK Listings Authority is moving to tighten controls on shell company floats. Due diligence conducted by JPMorgan and Credit Suisse will be closely scrutinised, following the Takeover Panel’s diagnosis that Indonesian investors were an unacknowledged concert party.
Bumi, complete with its muck-slinging governance breakdowns, makes London look like the kind of second-rate bourse that specialises in speculative mining plays because those are all it can attract. If Nat Rothschild needs to make amends, so do market gatekeepers.