For more than two centuries, the Rothschild name has stood for a deft touch in European cross-border finance, as well as representing great wealth and influence.
Today, the family name, one of Europe's banking dynasties, has become ensnared in a nasty dispute after a powerful family in Indonesia appears to have outmaneuvered Nathaniel Rothschild, the five-times great-grandson of the dynasty's founder.
After an inauspicious start as a young investment analyst at Gleacher in Manhattan in the mid-1990s, Mr. Rothschild's rise as a moneymaker in his own right has been fairly rapid. He was co-chairman of the hedge fund Atticus Capital before striking out on his own and engineering a series of international deals.
In late 2010, he announced what was expected to be his most ambitious project yet, a $3 billion deal with the Bakrie family, an Indonesian dynasty whose vast interests include both mining and politics, to create the London-listed mining giant Bumi.
“We've announced the creation of an Indonesian coal champion,†Mr. Rothschild said at a news conference at the time.
That partnership now lies in ruins.
Mr. Rothschild, a 41-year-old British financier, has resigned from Bumi's board amid allegations of financial misconduct at some of the company's Indonesian subsidiaries. The owners have been caught in a yearlong feud over the running of the company. And questions have been raised about the corporate governance that allowed Bumi to trade on the London Stock Exchange.
In the latest round of infighting, Mr. Rothschild - a descendant of Nathan Mayer Rothschild, who helped finance the British victory over Napoleon at Waterloo - has accused Samin Tan, Bumi's chairman, of not protecting the rights of minority shareholders.
“I have lost confidence in the ability of the board to stand up for investors,†Mr. Rothschild, who owns roughly a 12 percent stake in the company, said in a letter announcing his resignation from Bumi's board.
In response, the Bakries said Mr. Rothschild should return his shares and other financial benefits connected to the mining company.
“What a disappointment Mr. Rothschild has been to us,†said Christopher Fong, a spokesman for the Bakrie family.
Mr. Rothschild is insisting that any decision about Bumi's future be delayed until an investigation is finished into ostensible financial misconduct at its subsidiaries, according to a person with direct knowledge of the matter who spoke on the condition of anonymity because he was not authorized to speak publicly.
The alliance with the Bakries had been part of a bet by Mr. Rothschild on the surging demand for coal by fast-growing economies in Asia. He raised £707 million, or $1.1 billion, in the 2010 initial public offering of Vallar, a London-listed investment company that was created to make acquisitions in the natural resources sector.
Later that year, Mr. Rothschild organized a cash-and-stock deal worth $3 billion that would give his company access to a number of Indonesian coal mining assets. The takeover also gave the Bakries a controlling stake in Bumi, the renamed Vallar that remains listed in London.
Since the deal was completed, not much has gone right for Bumi, as Mr. Rothschild's effort to profit from an expected commodities boom has floundered.
With demand for coal falling because of the global financial crisis, the company's share price has plummeted more than 80 percent over the last 18 months. In the first half of this year, the company reported a net loss of $106 million, a slight improvement on the $296 million loss in the same period last year. The value of Mr. Rothschild's own investment of $148 million has more than halved, to $86 million.
Mr. Rothschild and his Indonesian business partners also have clashed over how the company should be run.
In a terse letter to the board late last year, Mr. Rothschild called on Bumi's chief executive at the time, Ari Hudaya, to resign. Mr. Rothschild said the company's head had failed to attend board meetings, dismissed investors' questions and neglected his duties as chief executive.
“It has become abundantly clear that he is neither fit nor suitable to carry on as C.E.O.,†Mr. Rothschild said.
The Bakries, however, have been calling the shots.
Late last year, the family sold a 24 percent stake in Bumi to Mr. Tan, a fellow Indonesian mining mogul, for $1 billion. The deal helped the Indonesian dynasty to repay outstanding loans owed to a consortium of lenders led by Credit Suisse.
After calling a shareholding meeting to reshuffle Bumi's executives, Mr. Tan took over as chairman, while Mr. Rothschild was reduced to a nonindependent director.
Controversy has continued to follow the ill-fated partnership.
Last month, Bumi announced an investigation into accusations of financial mi sconduct totaling $500 million at several of its Indonesian subsidiaries. The accusations relate to financial accounting records for last year in which certain investments were marked down to zero, according to a company statement.
The Bakries have been quick to respond. Last week, the family offered a combined $1.2 billion to acquire all of Bumi's mining assets. The deal would involve a partial share swap for a 10.3 percent stake in PT Bumi Resources, a subsidiary. The Indonesian family would then offer to buy Bumi's remaining 18.9 percent stake in the Indonesian coal mining company for cash by the end of the year.
The Bakries also want to buy Bumi's majority control of PT Berau Coal Energy, another Indonesian mining company, in the next six months.
“A lot of investors may want to sell up and move on,†said Richard Knights, an analyst with Liberum Capital in London.
Those shareholders do not include Mr. Rothschild. The British financier has ridic uled the proposal, saying the board should not review the deal until the investigation into financial misconduct is completed.
He also has accused his Indonesian partners of giving Mr. Tan, Bumi's chairman, preferential treatment under which he could receive more than double what has been offered to other shareholders.
“It would be a disgrace to proceed with, or even to entertain, the proposal made by the Bakries,†Mr. Rothschild said.
A spokesman for Bumi said the board would continue to look at the proposal.
The problems facing Mr. Rothschild have again raised concerns over natural-resources companies that want to list in London. Analysts say many of these companies are eager to tap the British capital's large investor base, but have often restricted the amount of shares offered to new shareholders so that majority owners can retain control.
Eurasian Natural Resources, a London-listed mining company part owned by the Kazakh government, for example, has run into a series of governance problems in recent years. That includes the ousting of some of its British board members last year after the majority Kazakh owners opposed their reappointment.
Scrutiny also has centered on so-called reverse takeovers, in which a private firm can obtain a London listing by acquiring a publicly traded company. Mr. Rothschild's deal to create Bumi allowed the Bakries to avoid many of the checks that would have been required if the Indonesian family had tried to take the company public on its own.
Last year, Mr. Rothschild also helped the Turkish company Genel Energy to float in London after it was acquired by Vallares, an investment company co-founded by Mr. Rothschild and BP's former chief executive Tony Hayward, for $2.1 billion.
British regulators are moving to clamp down. This month, the Financial Services Authority, the country's regulator, completed plans to restrict the ability of firms to complete reverse takeovers in London. Authorities also are demanding greater separation between a company's controlling shareholder and the daily operations of the business.
“There's been a misunderstanding in the market because many of these rules were unwritten,†said John Hammond, head of capital markets at the consultancy Deloitte in London. “Now they've been laid out for everyone to see.â€
