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Mexican cement giant Cemex SA has turned down the
government's proposal to buy the company's shares in state-owned cement
maker PT Semen Gresik (SG), saying that most of the government's
proposal goes against the existing deal made in 1998 between the two
sides.
Although it is most likely now that Cemex will finally sell its shares
to the Rajawali Group, the government still faces the threat of
arbitration proceedings as the Mexican firm has not officially
withdrawn its complaint.
In its reply to the government Tuesday, Cemex, through its subsidiary
Cemex Asia Holdings Ltd, said the company was no longer required to
sell its shares to the government, which it said had failed to exercise
its purchase option by the set deadline or in accordance with the
prescribed procedures.
"Cemex Asia is free to sell the shares that were subject to the
government's right of first refusal to the proposed purchaser
identified in our first refusal notice subject to the terms provided in
the CSPA (conditional sale and purchase agreement)," said Cemex in its
letter, which was signed by its executive Hector Medina and a copy of
which has been obtained by The Jakarta Post.
The company argued that the government's intention of designating
unspecified parties affiliated with the government to buy the shares
was contrary to the CSPA, which only granted the right to acquire the
shares to the government itself.
Cemex recently signed a deal with Rajawali to sell its 24.9 percent
stake in Semen Gresik for US$337 million. But the transaction is
subject to the approval of the government as the majority shareholder
in the country's largest cement maker.
"There are now no longer any substantial legal obstacles preventing
Rajawali from buying the Cemex stakes. The government should comply
with the CSPA," Rajawali managing director Daryoto Setiawan said.
However, State Minister for State Enterprises Sugiharto said the
government would explore other options for making Cemex accept the
proposal, especially as regards who was eligible to exercise the
government's right under Indonesian corporation law.
"We are still discussing with Cemex about who is eligible to exercise
our rights, the transaction period and our demand that Cemex withdraws
the ongoing arbitration process," said Sugiharto, without elaborating
further.
He made his remarks after a special meeting with Vice President Jusuf
Kalla, Coordinating Minister for the Economy Boediono, Finance Minister
Sri Mulyani and JPMorgan Indonesia president director Gita Wirjawan --
an advisor to Cemex.
The Cemex letter, however, did not say anything about ending the
arbitration process.
Sugiharto also warned that the government would refuse to give its
approval to the transaction with Rajawali should Cemex turn down its
request to end the ongoing legal dispute before the International
Center for the Settlement of Investment Disputes in Washington D.C.
Sugiharto claimed the government and Cemex would meet soon to try to
settle the problem in an amicable way.
Cemex brought the government of Indonesia to arbitration after it
failed to abide by a 1998 investment deal that would allow Cemex to
gradually become the majority shareholder of Semen Gresik.
The management of Semen Padang and some politicians in Jakarta and West
Sumatra adamantly opposed the deal in 2002. They eventually were
supported by both the local and central governments.
An official at the State Ministry for State Enterprises said he
believed that the failure to resolve the Cemex case was partly the
result of Sugiharto's failure to hire lawyers familiar with
international deals.
"It is a blunder made by the minister. The content of the reply from
Cemex was humiliating. It reflects a lack of legal understanding about
international deals (on the part of the government)," said the
official, saying that the case could damage Sugiharto's standing as a
minister.
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