Article Vallar: raising the stakes

Who would true Vallar see, let him come hither. When the London-listed cash shell announced its $3bn purchase of 25 per cent of Indonesia’s Bumi Resources and 75 per cent of Berau Coal Energy in November, it was not quite the acquisition investors expected. Established by Nathaniel Rothschild and seasoned mining executive James Campbell, Vallar’s mission was “to acquire a single major company active in the global metals, mining and resources sector” and seize “opportunities to acquire controlling interests”. Instead, its maiden deal was a reverse takeover that gave coal producer Bumi’s shareholder Bakrie Group 43 per cent of Vallar and Berau’s main vendor 25 per cent. That, however, was only the start: the pack is being reshuffled.

Vallar wants to lift its stake in Bumi via a further share exchange to between 40 and 51 per cent, drawing key Bumi investors on to its own register. Indonesia-centric Bumi shareholders may be restricted by their mandates from holding London-listed shares. But foreign shareholders are likely to be lured by the significant increase in index-tracker demand for shares in Vallar that should accompany its eventual inclusion in the benchmark FTSE 100 index.

The deal flow is not all one way though. Depending on the final size of Vallar’s Bumi holding, Bakrie Group will need to top up its Vallar stake – potentially raising it to 55 per cent – to avoid dilution. Its voting rights are deliberately capped at 30 per cent to avoid the need for an offer. Bakrie Group will also benefit from indexation of its Vallar stake – and could usefully pledge this as collateral to refinance its own debt.

Bakrie Group may get more out of its pukka London listing than meets the eye. But, with the coal price on its side and indexation on the horizon, things do not look too shabby for Vallar’s original shareholders either. Not such a bad deal, after all.