In late 2004, Hilmi Panigoro, Director General of Public Indonesian oil company Medco Energi Internasional, seeks to regain a controlling stake in the company of his brother Arifin founded in 1980. The Asian financial crisis of 1999 led to a major restructuring that left Panigoros from 34.1% equity stake in Medco. Two other large shareholders are now looking to sell their combined share of 50.9% and chose Temasek, the Singapore government investment arm, as the preferred bidder. Panigoros have the right of first refusal, but only four month window to raise the capital necessary to prevent rate Temasek. Panigoro brothers are considering two phase of the plan: leveraged buyout, to be followed by a secondary offering of shares on the stock price is high enough to enable them to repay the loan and keep the majority stake of the company. As attractive as the plan seems, they are worried about the high cost of credit and the risk that the proposal might fail. In January 2005, failing to consider alternative financing plans, Panigoro brothers have to decide whether to go ahead with the plan, or lose control of Medco to Temasek. "Hide
by Belen Villalonga, Raphael Amit, Chris Hartman Source: Harvard Business School 21 pages. Publication Date: August 17, 2006. Prod. #: 207021-PDF-ENG
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