* Bakries propose $1.3 billion deal to buy back assets
* Propose unwinding of Bumi Plc
* Bumi shares soar over 40 pct after split proposed
* Rothschild sees "challenges" even after Bakrie exit
SINGAPORE/LONDON, Oct 11 (Reuters) - Indonesia's powerful
Bakrie family has proposed splitting from financier Nat
Rothschild and Bumi Plc, the London-listed miner they co-founded
two years ago, after news of an inquiry into possible wrongdoing
strained their already tense relations.
Under a plan put to board directors and top investors on
Wednesday night, the Bakries would take back their Indonesian
assets with deals worth an estimated $1.38 billion.
If their share swap and cash purchases proceed, they would
quit Bumi Plc and dismantle the company they created with
Rothschild, drawing a line under the family's ill-fated London
The possible unravelling of Bumi Plc, one of the
world's largest thermal coal exporters, is a blow to Rothschild.
It also marks the potential end of a miner that has become
emblematic of institutional investors' worries about governance
of foreign resources firms listed in London.
"The Bakrie family agreed to create Bumi Plc as a way to
expand their interests, their reputation," one source familiar
with the situation said. "In the end, it's been nothing but
Tensions have been rising between Bumi's shareholders,
exacerbated last month by the company's announcement that it
would start an investigation into possible wrongdoing at its
Indonesian coal mining operations, including PT Bumi Resources
, the jewel in the Bakrie crown.
It is unclear whether the Bakrie proposal will allow the
inquiry, being led by London lawyers, to proceed. It had been
expected to be completed within weeks.
"For the Bakries, they will do anything to defend Bumi
Resources," said a Bakrie insider who was aware of the proposal.
Under the offer, the Bakrie family would cancel their
indirect stake in the London-listed group, around 23.8 percent.
In exchange, they would get 10.3 percent of PT Bumi Resources,
out of a stake of just over 29 percent currently held by the
London firm. The Bakries would then buy the remaining 18.9
percent of shares for cash, before Christmas 2012.
The Bakries have also made a conditional proposal to buy out
Bumi Plc's 84.7 percent stake in PT Berau Coal Energy,
an associated Indonesian coal miner, within the next six months.
The news boosted Bumi's volatile shares, after months of
steep losses caused by boardroom rows, Bakrie family debts and
tumbling coal prices.
"Yes, it is an acknowledgement (of defeat)," said one source
close to the situation, who added it would be difficult for Bumi
Plc to work in Indonesia having split from the Bakries. "No one
would want to start from here, but given where we are, this is
far from being the worst option."
END OF THE AFFAIR
The Bakries - advised by Ian Hannam, the former JP Morgan
banker who masterminded the creation of Bumi Plc - outlined a
scheme that would leave the London firm without operating assets
and back at square one as an investment shell.
Bumi Plc's board is now considering the offer and will
consult with top investors.
"We are disappointed because there are some absolutely
fantastic assets in Indonesia," said one top-10 investor in Bumi
Plc, lamenting the loss of "beautifully located" assets, but
pointing to an outcome which could please bruised investors.
"This was a stock that was 150 pence before recent events -
the current proposal, if the Bakries have the money to go
through with it, would lead to potential return of just under 5
pounds a share, according to our calculations," he said. "From
our point of view, that is a disappointing outcome, but it is
not as catastrophic as it was."
Bumi Plc shares closed at 259 pence after the proposal, up
almost 40 percent but still far from peaks of over 12 pounds hit
in June last year. Jakarta-listed shares in PT Bumi Resources
ended up almost 6 percent.
London brokerage Numis said it might be time for the
shareholders to cut their losses.
"Valuation aside, this looks like good news for Bumi Plc, in
our view, as it could walk away with its reputation intact and
some cash in the bank," Numis analysts said. "Losing its main
assets would be a disappointment, but given the soggy coal
markets and dark cloud surrounding the company, this might be a
good way to move on."
Dileep Srivastava, director and corporate secretary for Bumi
Resources, said the offer could be a win for all sides, leaving
the Bakries to focus on operations "without distractions".
It was unclear, however, how the indebted Bakries would pay
for the cash portion of deal - particularly the stake in Berau,
estimated at almost $950 million in the proposal - prompting
speculation about whether the deal would be completed.
Sources familiar with Bakrie finances said the proposal
would, for example, need approval from lenders involved in a
$437 million loan backed by the family's shares in Bumi Plc.
A Bakrie spokesman, however, said the London market
underestimated the group's financial clout, dismissing concerns
that Bumi Plc could end up left with Berau, a smaller share in
PT Bumi Resources and difficult working conditions in Indonesia.
People close to the deal said the Bakries were preparing to
borrow up to half the amount required for the deal, possibly
through financing arranged by long-time bankers Credit Suisse.
The Bakrie proposal waqs made just before Bumi's board met
on Thursday in Singapore. The gathering included Rothschild,
Indra Bakrie - one of the Bakrie brothers - and Samin Tan, an
Indonesian billionaire who pulled the Bakries back from default
last year with a $1 billion investment, only to watch the value
of his shares crumble.
The Bakries and Tan each hold half of a 47.6 percent stake
in Bumi Plc, while Rothschild owns 12 percent.
The relationship between Rothschild and the Bakries, one of
Indonesia's most powerful families, has soured since the London
group's inception, particularly after a leaked letter from the
financier last November that called for a "radical clean-up" in
PT Bumi Resources.
But relations have also frayed between the Bakries and Tan.
Tan said in a statement on Thursday that he expected to
continue holding shares in Bumi Plc, and to stay on as chairman.
He is discussing with the Bakries how to dissolve their tied
shareholding in Bumi Plc, and expects to recover his original,
debt-funded investment, he said, giving no details.
The Bakries also urged Rothschild to return shares he
received as payment for the successful acquisition of the Bakrie
assets, arguing Thursday's proposals reversed that deal.
Rothschild, for his part, said he expected the inquiry into
alleged wrongdoing to be completed. He pointed to continued
challenges for Bumi, including from shareholders still linked to
Bakries, after months of struggling to implement "appropriate
standards of corporate governance".