Tuesday, January 7, 2014

East Meets West: Rothschild’s Investment in Indonesia’s Bakrie Group

BENNEDSEN Morten, HRNJIC Emir, WIWATTANAKANTANG Yupana
©2013 INSEAD Case Study
 Also available: Teaching Note

This case describes the challenges encountered by Nathaniel Rothschild after making a US$3 billion investment in 2010 in a family-owned business group in Asia. Scion of the Rothschild banking dynasty and private equity fund manager, Rothschild and his business associates created a LSE-listed shell company, Bumi PLC, which acquired PT Bumi Resources and Berau Coal. These were among Indonesia’s largest coal mines and the largest coal exporters in the world, and were controlled by the Bakries, a powerful Indonesian family whose patriarch was a candidate for the presidency in 2014. After losing at least 70% of his investment in three years, Rothschild eventually requisitioned an extraordinary general meeting in February 2013, attempting to remove the Bakries and their associates from Bumi's management team. Despite western-style corporate governance manoeuvres, the PE investors found it challenging to control the politically connected family in Indonesia.

Pedagogical Objectives: The case is designed for courses in Corporate Finance on the topic of family business and/or raising funds, or courses in International Finance or Investment in Emerging Markets (particularly Indonesia). Alternatively, it could be used in a course on Corporate Governance on the topic of shareholder activism and board monitoring.