Bumi Plc's Indonesian shareholders have almost half the board ranged against co-chairman Nathaniel Rothschild, sources said, and are still confident they can weaken his grip on the miner after a bid to oust him this week fell through.

The public tussle for Bumi, which controls some of the richest coal mines in the world, between the scion of Europe's most storied banking dynasty and the Indonesian investors is likely to escalate again next month in the board room.

Indonesia's Bakrie Group and partner shareholder Samin Tan, who together own 29.9 percent voting rights in the firm, backed down this week on a proposal for an extraordinary shareholders meeting aimed at removing Rothschild as well as other directors from the board, and to install Tan as chairman.

The Indonesians are still unhappy and the row is likely to continue until Rothschild leaves the firm, two sources familiar with the matter told Reuters on Thursday, who declined to be identified because of the sensitivity of the situation.

They will instead pursue their aims to shake-up the management at a board meeting on March 26, after being told by independent directors that an extraordinary meeting was not the way to do business in London and could lead half the board to resign, said the sources familiar with the situation.

The Bakries still don't like Rothschild on the board but they decided to stand down because they may lose their credibility if they forced an extraordinary general meeting, said one of the sources.

Nearly half the directors are likely to want Rothschild off the board, the source said.

But the Indonesian investors may find it more difficult to achieve their aims through the board than through a shareholder meeting, where they were confident they would garner half the votes needed.


Graphic on top coal miners: http://link.reuters.com/hym74s

Factbox on Indonesia risks: http://r.reuters.com/pyt92n


The public row has battered Bumi's stock and renewed worries over corporate governance at a firm controlling key mines in Indonesia, the world's top exporter of thermal coal, highlighting the risks of investing in emerging market companies listing on Western markets.

Bumi Plc's stock price has slumped about 16 percent since the Indonesian investors' proposals to shake-up the board, taking losses since it started trading last July to 33 percent.

Tensions between the sides rose late last year as the Bakries believed Rothschild was trying to take over the firm on the cheap after it nearly defaulted on a $1.3 billion loan, while Rothschild called for a radical cleaning up of the miner and its debts in a letter leaked to media in November.

On the board, another source familiar with the board situation said the Bakries have seven people out of 15 on their side, including chairman Indra Bakrie, CEO Ari Hudaya, CFO Andrew Beckham and four Indonesian directors.

The others, including veteran British businessman Julian Horn-Smith and former diplomat Robin Renwick, may side with Rothschild, the source said.

It was not possible to independently verify which side directors are on or how they may vote. Rothschild, the Bakries and other parties were not available for comment.

Rothschild is playing the victim as the share price tumbles, and he has the advantage among independent shareholders, so even if the Bakries and Tan win the votes, they'll still lose the battle, said another source familiar with the situation.

The Bakries and Tan presume that Rothschild will resign of his own will, that he can stay as a shareholder but nothing more, the source added.

INDEPENDENT PRESSURE Tan and the politically connected Bakries, one of Indonesia's largest business conglomerates, announced they would change their proposal for a shareholder vote after a meeting with two independent Bumi Plc directors, Horn-Smith and Renwick, who flew in from London.

Horn-Smith and Renwick told the Bakries and Tan that they needed to first discuss the proposed changes with the board and warned them that even if they won a shareholder vote, they would lose the trust of many international shareholders and independent directors, two sources briefed after the meeting said.

This is not Indonesia. If you want to say that it's nothing personal with Rothschild, then do it via a nomination committee instead of going for an extraordinary general meeting, said the source trying to sum up the message from Renwick and Horn-Smith.


The Indonesians' climbdown from their initial proposal appears to be a temporary victory for the British financier.

Sources familiar with the situation say Rothschild was aiming for the changes to be discussed at board level and now expect he will stay as on the board as a non-executive to protect minority shareholders.

Tan told Reuters that the Indonesian stakeholders were not targeting Rothschild and just want a cohesive board, with management focused on slashing the firm's debt and executing its ambitions to ramp up coal production and develop other mining assets from African iron and diamonds to Sumatran zinc.

He's (Rothchild's) good in finance but knows nothing on coal, so perhaps he could stay as a shareholder and let his firm be operated by people who understand coal, said Willy Sanjaya, a market analyst at a Jakarta-based brokerage firm Lautandhana Securindo.

Either way, Rothschild's dream of retaining control over a firm aiming to become the world's biggest coal miner, after his shell investment firm Vallar did a reverse takeover with the Bakries last year, is looking in serious doubt.

Rothschild is being treated as a little kid. He is allowed to play with the big boys, but only if he sits in the corner and doesn't talk, said another source familiar with Indonesian mining. As a foreign investor in Indonesian mining you can't get anything done without a powerful local partner, and once you get a powerful local partner, they turn against you.

(Additional reporting and writing by Neil Chatterjee; Editing by Jon Loades-Carter and Matthew Bigg)