Chairman of the House of Representatives (DPR) Commission VII overseeing energy and mineral resources, Sugeng Suparwoto, says discussion on the final decision regarding shares acquisition of PT Vale Indonesia (INCO) by Mining SOE Holding MIND ID is in stalemate due to bidding technicalities.
INCO has requested that the 14 percent stake to be transferred to MIND ID should be 1,5 times of the company’s book value. Meanwhile, MIND ID offered approximately 1.3 times the company’s book value.
“MIND ID bid approximately 1.3 times. But the problem is how much is the exact value in terms of value, so as suggested by us in Commission VII, the government is now conducting due diligence. I think so that everything is fair,” Sugeng said on the sidelines of CNBC Indonesia’s Mining Zone event on Thursday.
Previously, Director of Avere Investama, Teguh Hidayat, said that the price of 14% of INCO shares that will be transferred to MIND ID is expected to be above the company’s book value. INCO’s book value is currently at the level of IDR 4,000 per share.
Teguh said that should they refer to the previous acquisition price of PT Freeport Indonesia shares by MIND ID, then the share price to be released by Vale Canada Ltd (VCL) as the current controller could double the book value.
“INCO’s book value is Rp 4,000 per share. If we use Freeport’s acquisition price, the price is twice the book value, so it will Rp 8,000 per share. But it likely be at Rp 5,000-6,000 per share,” he said.
Furthermore, Teguh assessed that the negotiation process for the share release price is projected to be quite long. Moreover, the SOEs Ministry as the shareholder of MIND ID wants to buy INCO shares at the lowest possible price.
“So the government wants it to be as cheap as possible, but we use the logic that from Vale, of course they don’t want to sell cheaply because what? With this divestment, Vale’s controlling portion in INCO is reduced. The company is no longer controlled by them, logically if that is the case, the purchase price must also be maximum,” said Teguh.
Indonesia’s share ownership in INCO through MIND ID is currently only at 20 percent, and around 21.18 percent is spread across the Indonesian stock market. This means that if the additional shares are only 14 percent, then MIND ID will own 34 percent of Vale’s shares.
Meanwhile, the majority shareholder of Vale itself is currently held by VCL with 43.79 percent of shares, then Sumitomo Metal Mining Co. Ltd (SMM) with 15.03 percent. However, it is still uncertain whose shares will be reduced, whether only VCL’s or together with the shares owned by Sumitomo Metal Mining Co Ltd (SMM).
