Indonesia's planned takeover rules draw market flak

By Harry Suhartono

JAKARTA, June 26 (Reuters) - Indonesia's proposed changes to its takeover rules unveiled last week have drawn flak from investors and could complicate Qatar Telecom's QTEL.QA $2.6 billion offer for outstanding shares in PT Indosat Tbk (ISAT.JK: Quote, Profile, Research), Indonesia's second-largest mobile phone operator. Bapepam, Indonesia's capital market watchdog, has said it plans to raise the threshold for tender offers to 50 percent from 25 percent currently, and will make it mandatory for listed companies to keep a free float of 20 percent.

Earlier this month, Qatar Telecom (Qtel) said it would pay $1.35 billion to buy out Singapore Technology Telemedia's entire 30.8 percent stake in Indosat, increasing its holding to 40.8 percent, from 10 percent.

QTel was required under the existing regulations to hold a tender offer for the remaining shares. But under new rules, with the 50 percent threshold, the tender offer would not be mandatory.

Even under the new regulation, QTel could still buy more shares in the market, raising its stake to 50 percent and then make a tender offer, or make a voluntary tender offer for the remaining Indosat's shares.

QTel officials were not immediately available for comment.

The proposed changes, posted on Bapepam's website on June 17, caught many fund managers and analysts by surprise and investors said the amendments would hurt minority shareholders.

"Investors will be less inclined to buy as there is less protection for minorities," Sarah-Jane Wagg, president director of UBS Securities Indonesia told Reuters.

"People cannot buy something where they as minorities don't have some protection from the majority."