Neither company will comment û ôat the momentö on the issue. However, Energi Mega Persada, IndonesiaÆs second-biggest publicly traded oil company, says it has appointed PT Ernst & Young Advisory Services to study its plan to merge with Bumi Resources.
"The merger will only be implemented after we take into consideration the result of our own study and that of the independent firm, as well as the interest of the company and shareholders," it recently said in a statement to the Jakarta Stock Exchange.
People close to the discussions say that merger plans are still only in the early stages with their respective boards. Any formal proposal will be subject to final approval by the stock market watchdog, Bapepam, and shareholders of both companies.
One sticking point is timing. Energi Mega Persada conducted a rights issue in late December. In the prospectus, issued on 22 December, the company said it would not issue or list new stocks or other securities that could be converted into stocks in the 12 months following the rights issue.
However, the president director of Energi Mega Christopher B. Newton said the merger plan was not contrary to the prospectus. "The prospectus is basically made to inform shareholders that we will not issue any stocks within the next 12 months that will dilute the public ownership," he wrote as an explanation to the Jakarta Stock Exchange.
Another criticism of the plan is that both are Bakrie Group-affiliated companies, a group with a large debt burden. To some, that debt dilutes theories of synergy in the merger.
Consider that the Bakrie Group accessed the dollar market last June for a $600 million future flow securitization via Merrill Lynch and then returned to the international capital markets in July with a $200 million exchangeable led by JPMorgan.
But a positive is nationalism. Some analysts would prefer to see the two companies merge and become stronger rather than be a takeover target for the likes of SingaporeÆs Temasek or MalaysiaÆs Khazanah.
If they joined forces, Bumi Resources, which has a market capitalisation of $1.76 billion and Energi Mega, which has a market value of $841.7 million, would become the nation's biggest energy stock. Currently, PT Perusahaan Gas Negara, which is 61% owned by the government of Indonesia, is the sector's biggest stock on the Jakarta exchange.
