GMR's plan to reverse-list Indonesian asset hits hurdle

A reverse listing is used by private companies to become publicly traded without resorting to an IPO

The move by GMR Infrastructure and Sinar Mas Group, its Indonesian partner, to jointly go for a reverse listing of their coal assets on the Singapore Stock Exchange has been delayed, it is learnt. Singapore Stock Exchange has returned the draft offer papers in this regard, indicating the powers of the management be diluted and the minority shareholders be given greater powers.

A reverse listing is used by private companies to become publicly traded without resorting to an initial public offering. Initially, the private company buys enough shares to control a publicly-traded company. The private company's shareholders excgange their shares in the private company for shares in the public company. Subsequently, the private company effectively becomes a publicly traded one.

GMR Infrastructure and Sinar Mas Group have opted for reverse listing as this would help get a better investor profile. Also, the stock would be re-rated substantially, as mining stocks are better traded on the Singapore Stock Exchange.

In 2011, Bangalore-based GMR Infrastructure had acquired 30 per cent stake in Indonesian coal mine company Golden Mines for $500 million. The remaining stake is owned by P T Dian Swastatika Sentosa, a subsidiary of Indonesia-based Sinar Mas Group. In mid-2012, the companies had decided they would opt for reverse listing on the Singapore Stock Exchange by acquiring Singapore-listed timber producer United Fiber System (UFS). The process was scheduled to have been completed by the end of the last financial year. But it would take at least two more quarters before the transaction is completed.

While GMR Infrastructure said the delay was speculative, the UFS legal counsel, Stamford Law Corporation, said it couldn't comment, as the deal was underway. A Singapore Stock Exchange spokesperson said, "As the Asian gateway and one of the world's more international exchanges, SGX is ready to support fund-raising activities of all companies that meet our listing criteria and corporate governance expectations. The listing requirements and governance standards ensure the interests of investors are protected and the integrity of the market is maintained."

As part of the transaction, UFS had said it would offer shares worth $1.8 billion for a 97 per cent stake in the Indonesian coal company, in a reverse takeover, which would shift the company's focus to coal mining.

Under the agreement, UFS would acquire a 97 per cent stake in PT Golden Energy Mines Tbk through the purchase of a 67 per cent stake from PT Dian Swastatika Sentosa Tbk, a subsidiary of diversified group PT Sinar Mas Tunggal, and a 30 per cent stake from GMR Infrastructure. The stakes are worth $1.2 billion and $554 million, respectively.

UFS would issue 3.2 billion of its own shares at $0.55 a share to fund the purchase, after which the majority ownership of the company would pass to GMR and PT Sinar Mas Tunggal. Sinar Mas' resulting stake would be 65 per cent. Subsequently, the Sinar Mas-GMR combine would be obliged to make an offer for all remaining UFS stock.