JAKARTA (Reuters) – Two units of Indonesia’s Lippo Group won minority shareholder approval for a $790 million deal in which private equity firm CVC Partners will take a controlling stake in Lippo’s department store chain.
The deal, announced in January and one of the biggest foreign investments in the country’s retail sector, had been criticised by some as little more than a financial restructuring of Lippo’s department store operations.
On Friday, minority shareholders of PT Matahari Putra Prima (MPP) (MPPA.JK) approved the firm’s plan to sell its retail chain, PT Matahari Department Store (LPPF.JK), to a joint venture set up by MPP and CVC.
Minority shareholders of Matahari Department Store, which has a stock market capitalisation of 7.95 trillion rupiah, or $871 million, also approved for the firm to borrow 3.25 trillion rupiah from Standard Chartered Bank (STAN.L) (2888.HK) and from PT Bank CIMB Niaga (BNGA.JK).
The bulk of that financing, 2.85 trillion rupiah, will be used by the joint venture between CVC and MPP to fund the purchase of MPP’s shares in Matahari Department Store.
Indonesia’s capital markets regulator, Bapepam, had requested that the minority shareholders’ meeting be delayed to late March to give more time to analyse the complex deal.
“The strategic alliance with CVC will help to develop the company’s business expansion,” said Benyamin Mailool, who is president director of both MPP and of Matahari Department Store.
“We are now focusing on closing the deal and hope it can be completed in two weeks’ time.”
Matahari Department Store, which now has 88 outlets across Indonesia, plans to open 150 new branches in the next 10-15 years, capitalising on rising incomes in a country that is widely expected to join Brazil, Russia, India and China and become a new BRIC economy.
Danny Kojongian, a director of MPP, told Reuters that the loans from Standard Chartered and CIMB Niaga would be partly collateralised by shares in Matahari Department Store owned by the joint venture.
Corporate governance activist Lin Che Wei criticised the deal this week, urging minority shareholders to vote against it and for Standard Chartered and CIMB Niaga to reconsider their loans.
Lin said that the loans were risky given that they were collateralised by shares in Matahari Department Store, which has a 30 percent share of the retail market. Standard Chartered and CIMB Niaga bankers could not be reached for comment.
Matahari Department Store’s stock price has surged 290 percent so far this year, while MPP shares are up 41 percent, beating the overall index .JKSE which has risen 10.5 percent.
Shareholders in MPP were offered a 1 trillion rupiah special cash dividend as part of the deal, which Mailool said would be paid in April.
“I suspect that they approved the deal because of the huge dividends that were offered as a sweetener,” said Edwin Sebayang, head of research at PT Bhakti Securities, who also questioned the pricing of the deal. ($1=9,120 Rupiah)
(Editing by Sara Webb and Simon Jessop)