05 Juni 2008
House to decide on Krakatau offering

State Minister for State Enterprises Sofyan Djalil said Wednesday that conducting an initial public offering (IPO) was a more realistic option in privatizing state owned Krakatau Steel.

"I am not saying an IPO is the best choice, Im saying it will be more realistic because this debate (on a strategic sale) has already strayed far off its tracks," he told a discussion.

Sofyans remarks come after months of debate on whether Krakatau Steel should be privatized through a strategic sale, where the company would be sold to selected investors, or via an IPO on the Indonesian Stock Exchange.

The government is conducting the privatization in an attempt to increase the companys production, which stands at 2.5 million tons per year. Current domestic annual demand is 6 million tons, with 2 million tons per year garnered through imports.

So far, five foreign steel giants have stated interest in the possibility of a strategic sale, including ArcelorMittal of India, BlueScope of Australia, Tata Steel of India, Essar of Japan and Posco of South Korea.

Sudir Maheshwari, ArcelorMittals director of finance, merger and acquisitions, said Indonesia had the potential to be the companys regional hub in Southeast Asia. ArcelorMittal is the largest steel producer in the world with an annual capacity of 120 million tons.

Sofyan had earlier said a strategic sale would be the most beneficial option, but the concept has drawn opposition from the companys board of directors, commissioners and trade union.

Some lawmakers have also recently joined the wagon favoring an IPO. citing the dangers of foreign ownership of the largest steel manufacturer.

Krakatau Steel president Fazwar Bujang said the company was perfectly healthy and did not need a strategic partner, before laying out plans to increase production capacity to 5 million tons per annum by 2011.

Sofyan said he regretted the prolonged debate, and that it had now entered a political dimension and urged the House of Representatives to decide soon.

"Whats good economically or financially may not be so good politically. This debate is no longer about substance but about politics, which is why Im urging the House to make a decision soon."

"The management seems to think an IPO can solve the problem. If the House agrees then fine, go ahead. Im challenging them to go public this September," he added.

He said due to a current worsening market condition. it was likely Krakatau Steel would initially sell only 5 percent of its shares in an IPO.

"If the market recovers, well sell more," he added.

The House is slated to hold several sessions on the matter over the next two weeks before making a decision, (anw)

Source : The Jakarta Post, Page : 13 

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