Tycoon wants to make Indonesia global player in food supply
Peter Sondakh, the Indonesian billionaire, made his fame and fortune turning around sickly stateowned enterprises into hugely profitable companies.
He launched in 1986 Indonesia’s first private television company and rolled out Asia’s first prepaid telecommunication services in 1997 — at the onset of the Asian financial crisis.
He rescued a cigarette maker from the brink of bankruptcy and made Semen Gresik — now Semen Indonesia — the number one player in the country’s cement industry.
Now, the Rajawali Group chairman and chief executive officer has set his sight on making his company a global giant in the palm oil business.
His game plan may even help Felda Global Ventures Holdings (FGV) reverse its own waning fortune.
“I am hoping that FGV will make a lot of money from this deal,” he told StarBiz at his office in central Jakarta’s business district recently.
He talks about the potential synergy between the two companies. Rajawali’s Eagle High Plantations Tbk has a lot of land, 425,000 hectares, scattered across Indonesia, while FGV had the experience in the downstream side of the business.
“If not in Indonesia where else can it (FGV) grow?” Sondakh asked.
He also dismissed claims that proceeds from the exercise — FGV is paying close to 2.8 billion ringgit ( US$740.4 million) for a stake in Rajawali’s plantation business — will be used to purchase assets from 1Malaysia Development Bhd (1MDB) projects.
“I am not investing in new property projects in Malaysia. Maybe in other things, but not property,” he said. His focus is to build in Indonesia. In Jakarta, near its headquarters, the Rajawali Group is completing work on its latest luxury hotel — the St Regis Jakarta — which is scheduled to open next year.
Sondakh is ranked sixth richest in Indonesia by Forbes with an estimated net worth of US$2.3 billion.
That gave him a lot of clout in a region where business and politics often mix.
“I always work with an institution in my joint ventures,” he said.
FGV on June 12 announced it had entered into heads of agreement with Sondakh’s Rajawali group to acquire a 37 percent stake in PT Eagle High plantations Tbk for US$680 million.
It is also buying Rajawali’s sugar cane plantation for US$67 million.
Eagle High has a total land bank of 425,000 hectares — in Kalimantan, Papua New Guinea (PNG) and Sulawesi. About 160,000 hectares of its land had been planted.
Sondakh sees PNG as the game changer for the industry.
It’s huge land mass and proximity to China — the biggest market for palm oil products — makes the area the hottest plantation spot for global players.
Sime Darby Bhd in October last year bought New Britain Palm Oil Ltd, which has 135,000 hectares of plantation land in PNG for US$1.74 billion.
It was a missed opportunity for FGV.
The company, which had seen its profits tumbling in recent quarters, said the partnership with Rajawali will transform the company into one of the world’s largest fully integrated oil palm plantation companies.
Sondakh said he had met President Joko “Jokowi” Widodo over the deal with FGV, and he said the president was keen on the tie-up as an opportunity to improve the living standards of more than 2 million Indonesia farmers.
Sondakh’s close relationship with the top office in Indonesia goes back a long way since the days of Sukarno.
“I know Megawati Sukarnoputri since we were younger,” he said. Megawati was Indonesia’s fourth president and a daughter of Sukarno.
Sondakh came from a family that had been in the commodity business since the 1960s.
They were first in the coconut business, which Sondakh took over in 1984.
Later in 1986, he started Indonesia’s first private television network Rajawali Citra Televisi Indonesia (RCTI) with Bambang Trihatmodjo, one of the sons of then President Suharto.
Sondakh no longer owns RCTI, but he is making a comeback in the broadcasting industry with the launch of Rajawali TV in May this year.
His partnership with the president’s son brought him closer to the administration.
In 1991, Sondakh was called in to take over debt-laden cigarette maker Bentoel Group from its private owners.
Reluctant at first, Sondakh decided to give it a go after some persuasion.
Bentoel’s debt restructuring process took six painful years, but by March 1997 the company had paid off all its foreign borrowings.
That timely decision spared the company the worst of the wild currency swings during the Asian financial crisis of 1997/98. Bentoel was listed in 2000 and later acquired by British American Tobacco for US$700 million.
While Sondakh was keeping busy putting Bentoel’s financials in order, he was again asked by the government in 1996 to take over a fledgling telco.
Seizing the opportunity, he launched Asia’s first prepaid services in 1997 and by 2002 had gained a 15-percent subscriber market share in Indonesia.
In 2005, Sondakh sold part of the company PT Excelcomindo Pramata (XL) to Telekom Malaysia Bhd.
The next year, he was tasked by then President Susilo Bambang Yudhoyono to buy out Mexican Cemex Group’s 25-percent stake in Semen Gresik — a listed cement producer.
Sondakh put down his own money and ended up with a 25-percent stake in Semen Gresik, while the Indonesian government holds 51 percent of the company.
He asked for full management control to turn around the company and by the time he sold out his stake in March 2010 the stock had risen from 1,800 rupiah (US$0.13) in July 2006 to 7,000 rupiah.
The company, which had changed its name to Semen Indonesia and controls a 42-percent market share in the country, is currently trading at around 12,000 rupiah.
“I believe in creating values for our partners,” Sondakh said.
Indonesia, with its abundance of natural resources and healthy demographics, should be a magnet for foreign investment, but a slew of obstacles make it a tough sell for investors to come in.
For plantation companies, buying huge tracts of land in Indonesia is never easy nor cheap.
The law stipulated that only listed companies can own more than 100,000 hectares of plantation land. This puts a huge valuation premium on listed planters.
First Resources Ltd., which has 190,000 hectares in Indonesia, is currently traded at about US$17,000 per hectare.
Thai dancers attired in traditional costumes perform a routine during the launch of Thai Air Asia’s direct flights from Bangalore to Bangkok, in Bangalore on Monday, June 29. Air Asia, the low-cost airline, is offering an introductory air fare of 3,999 Indian rupees (US$62.63) each way to fly between the Thai capital and the southern Indian city.