ARMS sees ACE takeover offer as best option

By Ruli Setiawan

LSE-listed coal miner Asia Resource Minerals plc (ARMS) said that a takeover offer by Asia Coal Energy Ventures Ltd (ACE), which is supported by Indonesia?s diversified Sinarmas Group, is the best option for the company at this stage.

ARMS, which is struggling to repay maturing debts as coal price tumbles, is faced with two recapitalization offers: one from key shareholder and co-founder of the company Nat Rothschild, and the other from ACE. The two are competing for control of ARMS, which owns 84.7 percent stake in IDX-listed coal miner PT Berau Coal Energy Tbk, Indonesia?s fifth largest coal miner.

Rothschild offered in November to raise his 18 percent stake, proposing to underwrite a US$100 million rights issue to help cut debt. But ACE, a vehicle backed by hedge fund Argyle Street Management, made an alternative offer in May to buy the company, which it values at 98.8 million pounds ($156 million), and restructure its debt.

Complicating the process, however, Britain's takeover regulator has asked ARMS to appoint an independent adviser to assess the fairness of a separate offer ACE made to Austrian bank Raiffeisen (RBI), which controls a large stake in ARMS, before ACE's bid can be put to ARMS' other shareholders.

"If the conditions to the ACE Offer and ACE recapitalisation are satisfied, and they proceed to a successful conclusion, they appear a better option for the company at this stage," ARMS said in a statement.

ARMS needs to restructure its debt as a $450 million bond comes due July of this year. It has also lost control of PT Berau as the company?s ousted CEO Amir Sambodo continues to prevent the new management team from fully taking over the company.

ARMS said that due to "intermeddling" by Sambodo - who was forced to resign in March and who had also been president of Berau - Berau now risks insolvency action and having to suspend some mining operations because it is not able to pay contractors.

?The unlawful intermeddling of Berau's former president director, Sambodo, has, however, continued despite his resignation and removal by Berau shareholders, and the company having taken action in the UK courts to enforce relevant contracts against him; and such intermeddling is now unfortunately causing delays in the payment of certain mining contractors, notwithstanding the fact that more than sufficient funds are available to Berau to make such payments. This could conceivably result in both the suspension of mining operations by one or more of such contractors, and cause one or more of the contractors to take insolvency actions against Berau in the Indonesian courts, which may have results which are materially detrimental to the company's value,? ARMS said.

Sambodo was removed by shareholders in March but he refused to vacate his position and ARMS top executives have been denied access to head office and limited access to Berau's IT, accounting systems and bank account information, ARMS has said.

Sambodo said he was forced to resign without reason or warning and contests the decision.

Editing by Reiner Simanjuntak