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Billionaire Sondakh unplugged


Global vision: Sondakh(pic inset) sets his sights on making Indonesia a global player in the palm oil business with the help of FGV.

Global vision: Sondakh(pic inset) sets his sights on making Indonesia a global player in the palm oil business with the help of FGV.

TAN Sri Peter Sondakh, said to be worth US$2.3bil, made his fortune by buying and selling companies, where he gained a reputation as a turnaround specialist.

In 2005, he sold a stake in a telecommunications company to Telekom Malaysia Bhd . This transaction propelled the media-shy tycoon into Forbes’ richest list.

A devout Christian, the 63-year-old cigar-chomping tycoon has been in business since the Sukarno days and today counts many of the region’s past and current leaders as his friends. A savvy businessman, he escaped the brunt of the region’s worst economic crisis in 1997/98 because of his timely decision to settle all his US-dollar borrowings in March 1997, just months before the rupiah started its spiral downwards against the US dollar.

Sondakh is the chairman and CEO of PT Rajawali Corpora, a conglomerate with operations in hotels, mining, agriculture, trading and transportation.

Very often, he has been roped in to help the Indonesian Government unwind its positions in companies of strategic interest. The better known one is Semen Gresik (now PT Semen Indonesia Tbk), where the Government was locked in a dispute with Cemex of Mexico.

Sondakh entered the fray, bought out the Mexican group, restructured the company, saw its return to profitability and exited. This was all in a space of four years between 2006 and 2010.

In Malaysia, the Rajawali Group has interests in hotels such as the Westin Hotel Resort and Spa Langkawi and St Regis Langkawi. The latter is a joint venture with the Finance Ministry, which has given rise to his close relationship with Datuk Seri Najib Razak, who is the Prime Minister and Finance Minister.

Sondakh has sets his sights on making Indonesia a global player in the palm oil business with the help of a Malaysian company, and hence, the deal with Felda Global Ventures Holdings Bhd (FGV).

Below are excerpts of StarBiz’s interview with Sondakh:

On the deal with FGV

FGV approached us about two months ago. We did not approach them. I feel they are good for us. It is about the synergy.

Were there any other parties that approached Rajawali? Yes, of course, but I cannot disclose them.

We are not in the market for selling, but we are in the market for obtaining synergies.

The dream of the Indonesian Government is to make the country the global supply centre of oleochemicals. This is why we have this arrangement with FGV.

The reason why we like FGV is because the company has a strong downstream business with offices in 13 countries. FGV offers all sorts of synergies, which made it very attractive for us.

It can help us grow our downstream business. It has the experience.

I have visited FGV’s office only twice; one to meet the CEO as a courtesy call and the other to meet the chairman for teh tarik.

Most of the time they are here. Their bankers approached us, not middle men.

On Sime and JP Morgan

Sime was never in the picture. As for JP Morgan, they were not the ones who approached us first. A Malaysian bank came first. They (JP Morgan) only came in at a later stage for FGV.

On synergies with FGV

There are three things about FGV that I liked.

Firstly, we can learn how to handle the settlers. Felda is the biggest cooperative in the world. We have four million hectares of farmer-owned oil palm plantations. In Indonesia, each farmer is given two hectares. We want to improve their standard of living. Secondly, Felda has the best seeds in the world. It also has the best research and development programme.

And lastly, FGV is strong in oleochemicals and in the sugar refinery business. It has sugar refineries, but doesn’t have sugar distribution nor sugar cane plantations. We have sugar distribution and sugar cane plantations, but don’t have sugar refineries.

Indonesia consumes 5.5 million tonnes of sugar, out of which three million are imported, and Indonesian sugar prices are double the import prices.

Just imagine if FGV were to move its refinery here, they would make money like crazy.

The premium for Eagle High Plantations

First of all, to buy the third-largest plantation in Indonesia is close to impossible. Never mind 70,000ha, try buying 20,000ha and see if the plantation owners want to sell.

How can you buy a big stake from an established plantation? Nobody is selling.

Even if you buy 1% or 2% of a plantation company from the stock market, the stock price will move.

So, don’t look at the stock price. You got to look at the enterprise value per hectare because that is how it is traded.

The reason we are doing this is because we saw the synergy and want to be a downstream player. The downstream is where we make the money.

Honestly, the price I was asking for was much higher.

You are asking why the high premium, but I ask, is there a premium?

Can you buy a chunk of a 30% or 37% stake at the normal market price? No.

When you buy plantations when it is below 100,000ha, the price is different.

The US$174.5mil deposit

We asked for the deposit, they agreed. So, it’s okay. We want to be sure they are serious.There are many people who come and say they are serious, but show me the colour of your money then I know you are serious.

Otherwise, they ask to do a due diligence, wasting too much time and energy.

If the money is not refundable, then it’s a fair question. The money is refundable, so what can we do with it?

Everybody who comes to us, we ask to put in a deposit.

On Rajawali’s gearing and group needing the money

The Rajawali Group has debts, but we have never defaulted on any loans. The debt level is very healthy. The gearing level is less than one to one.

The notion of the group requiring the huge deposit because of its debts is wrong.

I called off the listing of our gold mine venture because valuations were not right. We will not compromise when we realise value.

The gold company we bought as a bankrupt company, we turned it around in two years. There are only two gold companies in this country that have a smelter. We are one of them.

We produce from gravel all the way to gold bullions in one location. Our concession is 40,000ha. It’s a huge operation. My cash cost is US$565 an ounce. I’m selling gold at US$1,200 an ounce.

A share swap deal

The option for the deal (between FGV and Rajawali Group) to be done on a share swap basis has been discussed, but we will explore that at a later stage.

We haven’t got time to understand the company (FGV). Is it a possibility? Yes, if it is willing, we are willing.

Kenal dulu, belum kahwin (Get to know first before marriage).

Let us get this thing working in Indonesia dulu (first). If it works well in Indonesia, what is closing the door to the next stage?

We can explore later.

Peter Sondakh , Rajawali , FGV

   

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