Bakrie Sumatera Declares Plans For Corrects Issue

Big Palm oil producer; PT Bakrie Sumatera Plantations,  revealed plans to raise Rp four.ninety-seven trillion ($526.8 million) - almost twice it is actual market capitalization - in a corrects offer to fund its expansion programs. The news sent its stock cost plummeting by as much as nineteen percent. Bakrie Sumatera intends to trade 9.47 billion new shares at Rp 525 each to shareholders on Jan. 28, according to a prospectus issued on Tuesday. Investors will accept the correct to buy five new shares for every two shares held, it said.

The offer price was a 23 percent discount from the company’s closing share price on Monday. Bakrie Sumatera said it would use Rp 2.2 trillion of the proceeds to buy and expand five oleochemical and palm oil makers. The acquisitions will include two distressed assets, palm oil companies PT Domas Agrointi Prima and PT Domas Sawitinti Perdana, from the heavily indebted Domba Mas Group.

About Rp 960 billion will be invested in three other plantation companies, and the rest will be used to expand upstream businesses and for working capital, the company said. The company’s shares plunged on Tuesday to Rp 560 from Rp 680, a 17.6 percent decline.

Poltak Holtadero, head of research at PT Recapital Securities, said stocks usually fell on news of a rights issue. “It’s good if the company wants to acquire Domba Mas’s assets,” but only if they restructure them, he said. “The first reaction is that investors will sell the company’s stock,” Poltak said. “Then they will wait and see about the company’s plans to use the capital from the rights issue.”

Bakrie Sumatera plans to meet shareholders on Jan. 18 to seek approval for the plan. For every 15 new shares purchased in the rights offer, investors will get one warrant that gives them the right to buy another share at Rp 530 in August 2010 through January 2013, the company said. The proceeds from the warrant sale would be used to fund working capital, it said.

On Monday, Eddy Soeparno, the chief financial officer of Bakrie Sumatera parent company PT Bakrie & Brothers, said Bakrie & Brothers will raise the money necessary to maintain its existing stake in Bakrie Sumatera at 41.8 percent.

Indonesia’s fifth-largest palm oil producer, Bakrie Sumatera is a member of the Bakrie group of companies controlled by Golkar chairman Aburiza Bakrie.

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