SINGAPORE/HONG KONG (Reuters) – Indonesian investment firm Armadian Tritunggal is exploring the sale of its majority stake in coal miner PT Berau Coal, in a sale that could value the coal firm at around $1 billion, sources told Reuters.
Tritunggal, which is controlled by Indonesian businessman Rizal Risjad, is seeking advice from Deutsche Bank (DBKGn.DE) and Bank of America’s (BAC.N) Merrill Lynch, two sources with direct knowledge of the deal told Reuters.
Former Merrill banker Sheldon Trainor has a complimentary role advising shareholders on the deal, the sources said.
Tritunggal may sell its entire 51 percent or a significant part of the stake to potential buyers, one of the sources told Reuters.
The sale by Berau’s biggest stakeholder could also trigger the sale of stakes by its minority shareholders.
Berau Coal, Indonesia’s fifth-biggest coal miner, is a joint venture between Tritunggal, Dutch firm dan Rognar Holding B.V. and Japanese firm Sojitz Corp, with Rognar and Sojitz owning 39 percent and 10 percent stakes, respectively, as per its website.
“The whole firm is being valued at between $800 million to $1 billion,” said another source familiar with the deal, who also did not want to be identified because the deal is not public.
One of the two sources with direct knowledge of the deal said the firm may fetch $1.5 billion. Indonesia’s top coal miner Bumi Resources (BUMI.JK) has a market value of $1.5 billion.
Berau Coal, Deutsche Bank, Merrill Lynch and Trainor all declined to comment. Risjad was unavailable for comment.
In August 2006, Risjad used $279 million in financing arranged by Merrill Lynch to buy out four other Indonesian parties in Berau and repaid its debt owed to U.S. hedge fund Farallon Capital.
The stake sale plan comes after PT Berau Coal said earlier this year that it may consider an initial public offering provided market conditions improve.
Berau Coal — which has 1,200 square km (460 sq mile) concession area in East Kalimantan province — produced 13.2 million tonnes of coal in 2008 and aims for production of 15 million tonnes this year.
Analysts are unclear about who will bid for the stake, but said power companies may be interested.
“It will come down to the price at which the owner is willing to sell because they might not be desperate for money,” said Rania Rahmundita, an analyst at CIMB-GK.
The stake sale’s timing is uncertain given coal prices are near a 21-month low, as the global financial crisis crimps energy demand and as concerns linger about a supply overhang.
Spot thermal coal prices have shed over 70 percent since hitting a record high of $201 a tonne in July.
Investors are also concerned about a new law in Indonesia, which analysts say has created uncertainty whether the government will continue to honour existing concessions.
Despite these concerns, a deal by Thailand’s PTT International PTT.BK to buy Australian miner Straits Resources (SRL.AX) coal and salt assets for $335 million earlier this month is a sign some investors are willing to take the risk.
By Saeed Azhar and Joseph Chaney
(Additional reporting by Michael Flaherty in Hong Kong and Harry Suhartono in Singapore; Editing by Neil Chatterjee and Muralikumar Anantharaman)