Bumi listing brings Indonesia's Bakries to London

* Bumi Plc, formerly Vallar, lists in London

* Bakrie family holds 55 percent stake

* Transparency key to easing governance worries, experts say

Shares in Bumi Plc , the mining venture founded by Nat Rothschild, listed under their new name on Tuesday, giving Indonesia's Bakrie family a foothold in London and rekindling debate on the governance of premium-listed firms. 

The politically connected Bakries have 55 percent of Bumi after a complex deal last year that transformed what was then Vallar, a shell set up by Rothschild, into a sizeable player with stakes in two Indonesian coal firms. 

The Bakries have only 29.9 percent of voting rights, a limit intended to protect minority investors. But the potential catapulting of one of Indonesia's best-known political and financial families into the bluechip FTSE 100 index has revived debate over corporate governance safeguards in the sector, particularly in resources firms with large majority owners. 

Indra Bakrie, Bumi's chairman, is the younger brother of tycoon Aburizal Bakrie, chairman of the Golkar party, part of Indonesia's ruling coalition. 

Though not uncommon elsewhere, hefty founder-shareholders are unusual in U.S. and UK markets where ownership tends to be dispersed, and miners like Fresnillo , Antofagasta and Vedanta -- all majority owned by their founding families -- have been viewed with caution by some institutional investors. 

In large part, opaque communications are to blame, and both fund managers and governance experts agree transparency will be key to the success of companies wanting to use the London market to cash in on the commodities boom. 

"You just have to come clean," the head of UK equities at a British fund management house said. 

"If you are in this part of the world, that is one of the major issues you are going to face. A lot of the time (investors) don't know whether something is happening or not until afterwards, which is another reason why a lot of (managers) won't go into these things." 

Potential pitfalls came to the fore earlier this month with a messy power struggle between the board and major shareholders at Kazakh miner ENRC . The spat has left the company bruised, shares battered, and saw two high-profile independent directors ousted.

COMING CLEAN

The solution for Bumi, governance experts agree, will be remaining as open as it was in its listing prospectus, which detailed fraud risks and allegations of graft among risks to investors over 20 pages. 

In one instance, it detailed allegations by an Indonesian tax official at the centre of a high profile corruption trial who said subsidiaries Bumi Resources, KPC and Arutmin paid him $3 million to settle tax disputes. 

Bumi said Indonesian police had found insufficient evidence to file charges against Bumi Resources, and internal investigations found the allegations "groundless".

But Tuesday's listing of Indonesia-focused Bumi could also serve to redress a corporate governance balance that often tips in favour of institutional investors. 

"We have to start being less suspicious about these new entrants to the market who are not playing the normal game of investing a small stake and want to buy a larger stake -- we have to recognise that has advantages," Roger Barker, head of corporate governance at the Institute of Directors, said. 

"Of course there may be an impact on the share price, a risk premium, but one has to decide - perhaps that is the price worth paying for the benefit of a long-term shareholder."

Rothschild, Bumi's co-chairman alongside chairman Indra Bakrie, expects Bumi to move into the FTSE 100 index later in the year, but there are still high-profile doubters. 

"It never occurred to those of us who helped launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance such as Vedanta, ENRC, Kazakhmys, Fresnillo," Richard Lambert, former head of the Confederation of British Industry (CBI) said. 

"Perhaps it is time for those responsible for the index to rethink its purpose," he wrote in a column in Tuesday's Financial Times focusing on Rothschild's second commodities venture, oil and gas shell Vallares. 

Rothschild joined forces with the Bakrie Group last year for Vallar to take a 25 percent stake in coal miner Bumi Resources and a 75 percent stake in Berau Coal Energy . 

Bumi Plc has since said it aims to increase its stake in Bumi Resources, Asia's biggest thermal coal exporter, to up to 50 percent. On Monday it said the stake stood at just under 29 percent after a deal with shareholders. Source: Reuters