(https://www.afr.com/wealth/investing/solo-sydney-banker-takes-on-billionaire-indonesian-family-20230216-p5cl4s)
Australian Jeremy Raper has a website, a history degree and four years markets training at Goldman Sachs. He&rsquo s deployed this modest personal arsenal against one of Indonesia&rsquo s richest families, the Widjajas.

At stake, according to Raper, is about $1 billion and ownership of Australian coal mines that used to belong to BHP.

Private investor Jeremy Raper worked at Goldman Sachs for four years. 

Little known in Australia, the Widjajas control Indonesia&rsquo s Sinar Mas conglomerates. Three months ago the family initiated a plan that would increase its ownership of the Brisbane-based Stanmore Resources.

From 2018 to 2020, the Widjajas  bought approximately two thirds  of Stanmore through a Singapore-listed company called Golden Energy and Resources. Their offers valued Stanmore around $250 million.

Today, Stanmore is worth $3.4 billion. That&rsquo s because of higher coal prices, and BHP&rsquo s decision to sell it mines and deposits containing at least 317 million tonnes of coking coal in 2021.

Delisting 
Last November, Golden Energy said it planned to buy the 22.5 per cent of shares in itself that are owned by outside investors. Those other investors include Raper, a 38-year-old professional investor from Sydney who now lives in Japan.

The Stanmore Isaac Plains Mine in Queensland.  Glenn Hunt

The acquisition would simplify ownership of the Australian coal mines, the company said, and save costs by making Golden Energy&rsquo s listing on the Singapore Exchange unnecessary.

The day before the offer was made public, for reasons that aren&rsquo t clear, Golden Energy shares fell from 90.5 Singapore cents to 67¢ .

The next day Golden Energy offered 16¢ for each of its shares and proposed a separate but related transfer of assets. The two deals meant shareholders were being offered 88.5¢ a share, according to the company. 
With Golden Energy shares at 67¢ , the deal seemed fair.

Complaints 
  Fuganto Widjaja, the executive chairman of Golden Energy, which controls Brisbane-based Stanmore Resources. 

Raper didn&rsquo t see it that way. He complained to Singapore authorities about the fall in Golden Energy&rsquo s share price, which he asserted was suspicious, and the value of the offer.

Golden Energy&rsquo s stake in Stanmore is worth $2.1 billion. Raper calculates that the Indonesian offer values the stake at $422 million.

Golden Energy said it didn&rsquo t know why its share price fell on that day, but pointed to media reports about the possible restructure. An independent adviser will assess if the offer is fair.

The letter said: &ldquo The offeror, an entity associated with the controlling shareholders (the Widjaja family), are executing a series of manoeuvres designed solely to extract over $1 billion SGD in value from minority shareholders.

&ldquo I would simply ask you to conduct your analysis with the dispassionate professionalism and adherence to best practices we would expect from a Singapore-regulated entity. I do intend to publicise the various abuses that have occurred here, in counsel with both Singaporean and Australian regulators and organs of the media in both countries.&rdquo

Buyers&rsquo choice
There is nothing wrong with offering shareholders a cheap deal. The Widjajas can&rsquo t compel people to sell. And Raper, who says he controls about 3 million shares, isn&rsquo t acting out of altruism. He wants to protect his financial interests.

He doesn&rsquo t present as a conservative investment banker either. His letters and emails contain strong language, italicised sentences and colour changes. He uses a website, Raper Capital, to publicise his criticism of companies, which he calls &ldquo engagement campaigns&rdquo . (He held junior positions at Goldman Sachs from 2008 to 2012. Afterwards, he became a fund manager analyst.)
A graduate of Sydney Grammar School, Raper believes financial markets are not as efficient or competitive as theorists argue because of insiders&rsquo power. &ldquo I try to think like a creditor,  but apply that mindset to look at equities, not credit,&rdquo he says.

Golden Energy said it had shared Raper&rsquo s letter with the Singapore stock exchange.

&ldquo Please know that throughout the current process, GEAR is in constant communication with the regulatory authorities,&rdquo the company said on Friday. &ldquo As the pending transactions are currently still undergoing regulatory clearance and finalisation, it would not be appropriate for us to comment at this stage.&rdquo

Fuganto Widjaja, the executive chairman of Golden Energy, was quoted saying in 2015 the conglomerate wanted to secure coal to support the rest of the group, which produces paper, food, financial services, and construction services.

&ldquo Coal will be for us what timber plantations are: a source of raw material for value added products,&rdquo he  said.

The Widjajas now control Indonesia&rsquo s second-biggest coal producer, according to an Indonesian media website called  Project Multatuli. Indonesia is the world&rsquo s biggest coal exporter, which makes them important figures in the global energy trade.

Golden&rsquo s Energy&rsquo s offer to other shareholders doesn&rsquo t have a closing date, but is likely to be in July, according to Raper.

With Emma Connors

If the authorities do nothing, future delistings could be packaged with extraneous elements to enable IFAs to agree they are fair and reasonable

 

THE proposed break-up and delisting of Golden Energy and Resources (Gear) is widely seen to be unfavourable for minority investors. But one shareholder of the company thinks the deal also breaches the spirit, if not the letter, of the Singapore Exchange&rsquo s (SGX&rsquo s) rules on delistings and exit offers.

 

Jeremy Raper, a full-time private investor who claims to own three million Gear shares, told me last week that he has conveyed his misgivings about the deal to the Monetary Authority of Singapore, the Securities Industry Council as well as SGX. He is hoping this will trigger an official examination of the proposed transaction, and improved terms for minority shareholders of Gear.

 

What exactly is the problem with the deal? The appointed independent financial adviser (IFA) is being asked to opine on whether the proposed distribution in-specie of Gear&rsquo s controlling stake in Indonesia-listed Golden Energy Mines (Gems) and the subsequent exit offer for Gear at S$0.16 cents per share &ndash when taken together as a single transaction &ndash are fair and reasonable.

 

The distribution in-specie of Gems and the delisting of Gear are inter-conditional on each other.

 

Raper told me last week the two elements of the transaction should not be conflated, and the appointed IFA &ndash W Capital Markets &ndash should be required to provide an opinion on whether the exit offer on its own is fair and reasonable.

 

SGX tightened up its rules on delistings in July 2019. Under Rule 1309, companies seeking to delist from SGX must make an exit offer in cash. The company must also appoint an IFA, and &ldquo the IFA must opine that the exit offer is fair and reasonable&rdquo .

 

The rule, as it is written, does not provide for aspects of a wider corporate transaction to be considered alongside an exit offer. But the rule does not specifically disallow it either.

 

Raper wants Singapore&rsquo s market regulators to now make it clear that all exit offers must be assessed separately by IFAs, and judged to be fair and reasonable before being allowed to proceed.

 

When asked about the manner in which Gear&rsquo s IFA is going to opine on the company&rsquo s delisting, an SGX Group spokesperson said: &ldquo SGX RegCo is awaiting the finalisation of the IFA opinion and the board&rsquo s recommendation and will review the outcome thereafter.&rdquo

 

Stanmore&rsquo s visible value

Gear said when it unveiled its proposed break-up and delisting on Nov 9 that a key rationale for the transaction is to cut its exposure to the thermal coal business conducted by Gems, which is currently facing environmental, social and governance (ESG) pressures.

 

Under the deal, shareholders of Gear can choose to receive 1.3936 Gems shares (which were trading at 7,100 rupiah per share at the time of the announcement) for every Gear share they hold or a cash consideration of 7,664.8 rupiah (which prices their entitlement of 1.3936 Gems shares at 5,500 rupiah per share).

 

On top of this, shareholders of Gear will receive the exit offer price of S$0.16 per share.

 

Gear shareholders who opt to receive Gems shares will be getting a total effective consideration of S$1.045 per share, based on the market price of Gems and SGD-IDR exchange rates at the time of the announcement. Shareholders of Gear who take the cash option for their Gems shares will be getting a lower effective consideration of S$0.846 per share.

 

Raper told me last week that he isn&rsquo t too concerned about the relatively low price being offered to Gear shareholders who choose to receive their Gems entitlement in cash, as Indonesia is not a developed market and Gems has limited trading liquidity.

 

Gear owns 62.5 per cent of Gems. A further 30 per cent of Gems is held by Radhika Jananta Raya, a wholly-owned subsidiary of Indonesia-listed ABM Investama. Gems closed Friday (Feb 17) at 6,575 rupiah.

 

Raper&rsquo s gripe with the proposed deal is that the exit offer of S$0.16 per share for Gear undervalues its remaining assets, which include the 64 per cent stake in Australia-listed metallurgical coal producer Stanmore Resources and a 50 per cent stake in gold miner Ravenswood Gold Group.

 

The value of Stanmore is particularly visible to international investors, as it is listed in a developed market and has performed strongly. Indeed, Raper said it was his interest in Stanmore&rsquo s potential that led him to invest in Gear in the first place. The way he saw it, Gear offered an indirect but cheaper means of gaining exposure to Stanmore.

 

Raper told me last week that Gear&rsquo s minority shareholders would probably be better served if the company proposed a distribution in-specie of its stake in Stanmore rather than its stake in Gems.

 

Stanmore has delivered a total return of 251.9 per cent over the past year, and currently has a market capitalisation of A$3.5 billion. This puts the market value of Gear&rsquo s stake in the company at more than S$2 billion, or some S$0.77 per share &ndash which is almost equivalent to Gear&rsquo s market price of S$0.81 per share.

 

Gems has delivered a total return over the past year of 16.9 per cent, while Gear has returned 118.9 per cent.

 

Regulatory test case

This column said on Nov 14 that the break-up and delisting of Gear will actually do nothing for the environment. Certainly, the deal will not result in Indonesia&rsquo s Sinar Mas group and its controlling Widjaja family reducing their involvement in the thermal coal sector.

 

Gear is 77.5 per cent-owned by Indonesia-listed Dian Swastatika Sentosa, which is in turn 59.9 per cent-owned by Sinar Mas Tunggal. So, the distribution in-specie of Gear&rsquo s 62.5 per cent stake in Gems will only result in another corporate entity linked to Sinar Mas becoming the single largest shareholder of Gems.

 

Gear itself will still be controlled by the Widjaja family after it is delisted. The entity that is offering to take Gear private at S$0.16 per share is a recently incorporated Singapore company called Duchess Avenue that is ultimately owned by Lanny Tranku, the spouse of Indra Widjaja.

 

Still, the ESG narrative Gear has wrapped around its proposed break-up and delisting could provide its appointed IFA with justification to wave through the miserly exit offer.

 

From a regulatory standpoint, this could well be an interesting test case. If the authorities do nothing and the proposed break-up and delisting of Gear succeeds, many future delisting proposals could be similarly packaged with extraneous elements to enable IFAs to agree they are fair and reasonable.

 

On the other hand, forceful regulatory intervention in the Gear case could scupper the whole deal and lead to a surge in volatility in Gear&rsquo s share price &ndash at least in the short term.

 

Perhaps the best outcome for the market as a whole is if the authorities were to clarify that IFAs should evaluate exit offers solely on their own merits, leading to Gear&rsquo s board negotiating a substantially better exit offer for its minority shareholders.

 

But, after observing the local market for several years, I fear that might be expecting too much of all the players involved.

Read more at:
https://energy.economictimes.indiatimes.com/news/coal/whitehaven-coal-posts-5-fold-jump-in-h1-earnings-but-dividend-disappoints/97969551