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Goldman, Citi to sell stake in Indonesia Adaro – sources

Posted on: April 19, 2009

Reuters – Friday, April 17

* Banks, hedge fund have 17 pct Adaro stake worth $500 mln

* Singapore’s sovereign fund GIC, Kerry Coal may not sell

* Utilities, coal companies likely buyers – sources

By Saeed Azhar

SINGAPORE, April 16 – Goldman Sachs <GS.N>, Citigroup <C.N> and hedge fund Farallon are looking to sell around 17 percent of Indonesian coal producer Adaro Energy <ADRO.JK> to strategic investors, sources told Reuters.

Based on the latest share price for Indonesia’s largest coal producer by market value, the stake is worth about $500 million.

The sale was expected after a lockup period ended in March for financial sponsors who had participated in Adaro’s $1.3 billion initial public offering last year, analysts said.

A source with direct knowledge of the matter said Goldman Sachs <GS.N>, which has a 9.94 percent stake in Adaro, is coordinating the sale of the shares.

“Pure coal plays are looking at it seriously. Utilities could be interested too,” said a second source close to the situation. Both sources declined to be identified because any deal is not public.

Goldman, Citigroup, Farallon, the Government of Singapore Investment Corp and Kerry Coal had a combined 25 percent stake in Adaro as part of a consortium at the time of company’s IPO in July 2008.

Goldman and Citigroup declined to comment while Farallon and GIC were not immediately available to comment.

The price these cornerstone investors paid was unclear, since many of them were existing shareholders at the time of the IPO.

Adaro shares, which closed 2 percent lower on Thursday, have fallen around 14 percent from an IPO price of 1,100 rupiah.

UBS, which has a “buy” rating on Adaro, said in a recent report the cornerstone investors could make a huge profit from the share sale.

Analysts said investors may want to sell given the uncertainty over coal prices amid an economic slowdown.

“I think the slowdown in global economic activities made the coal outlook a bit sluggish over the next 12 months,” said John Teja, head of equities sales at Ciptadana Securities in Jakarta.

“Moreover tight global liquidity might force these investors to cash in.”

Adaro said shareholders had not briefed them about their plans.

“They are our existing shareholders, but we have not been briefed on the plan that they have with regards to their ownership,” Andre Mamuaya, director at Adaro told Reuters


The IPO raised eyebrows among domestic investors and some global funds, who were shut out of the country’s biggest public offering as shares were distributed to connected parties. [ID:nJAK22790].

Several analysts including UBS have written in recent weeks that a share selldown was imminent.

However, not every investor is looking to exit Adaro, as GIC and Kerry Coal, a firm linked to Malaysian billionaire Robert Kuok, will likely retain most of their stake, said a third source familiar with the deal.

Shares of Adaro overtook the country’s biggest coal miner Bumi Resources <BUMI.JK> as Bumi’s parent faced financial difficulties last year.

Adaro, which expects to produce 42-45 million tonnes of coal this year, up from 38.5 million tonnes in 2008, plans to spend up to $100 million to acquire a coal barge and trans-shipment firm to improve the supply chain for its operations in Kalimantan on Borneo island.

(Additional reporting by Harry Suhartono in SINGAPORE and Joseph Chaney in HONG KONG; Editing by Neil Chatterjee and Lincoln Feast)


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