LONDON--The Indonesian coal mining company Bumi PLC (VLLRF, BUMI.LN) is considering an alternative $508 million all-cash deal to separate itself from its major shareholder and co-founder, the Bakrie Group, according to people familiar with the matter.

Bumi Chairman Samin Tan is in talks to buy the Bakrie Group's 23.8% Bumi stake for about $230 million, one of the people familiar with the matter said. The Bakrie Group would then combine the proceeds with additional funds to buy Bumi's 29.2% stake in Indonesia's largest coal mining company, PT Bumi Resources TBk (BUMI.JK), for $508 million in cash.

Bumi and the Bakrie Group declined to comment on the alternative proposal. Attempts to contact Mr. Tan were unsucessful.

The two-step deal would satisfy the goal of severing ties between the Bakrie Group and Bumi while giving Bumi shareholders cash in hand rather than a mix of cash and Bumi shares, as previously outlined in a preliminary proposal last year. One of the people familiar with the matter said that under the alternative proposal, Bumi will likely return the proceeds from the Bumi Resources stake sale to its shareholders via a special dividend.

The Bakrie Group has been seeking to separate itself from the troubled mining company since October following repeated boardroom rifts over corporate-governance issues and the launch of an independent probe into financial irregularities at Bumi's Indonesian assets. This, alongside weakening coal prices, has caused Bumi's share price to plummet nearly 75% since its initial listing as Vallar in 2010.

Bumi and the Bakrie Group signed a preliminary agreement in February to separate themselves from each other. As part of that deal, the Indonesian conglomerate controlled by the influential Bakrie family agreed to buy an 18.9% stake in Bumi Resources from Bumi for $278 million in cash. In a second transaction, the Bakrie Group said it would buy Bumi's 10.3% stake in Bumi Resources in exchange for the cancellation of the Bakrie Group's Bumi shares.

Under the alternative proposal, however, the Bakrie Group is now considering selling its 23.8% Bumi stake to Mr. Tan for cash rather than giving the shares directly to Bumi for cancellation.

In order for the deal to go ahead, Bumi shareholders would have to vote in favor of an exemption that would allow Mr. Tan to double his holding in Bumi without triggering a a requirement to make a full takeover offer for the London-listed mining company. The U.K. Takeover Panel must also agree to the exemption, one of the two people familiar with the matter said.

The alternative proposal was first reported by Bloomberg News.

Nathaniel Rothschild, a major shareholder and co-founder of Bumi, said the alternative proposal "is Samin Tan's side deal: taking control without paying a premium, and denying minority shareholders the potential upside that all would have enjoyed equally from buying back the stake."

Mr. Rothschild called on U.K. regulators and Bumi's board to protect against such behavior and once again called for Mr. Tan to step down immediately as chairman given his conflict of interest.

Mr. Tan has previously said that he would step down as chairman once the deal with Bakrie Group is done and a new independent chairman has been selected. He also told reporters at Bumi's annual general meeting last month that there was no side deal between him and the Bakrie Group.

Mr. Tan, through Borneo Lumbung Energi & Metal (BORN.JK), acquired a 23.8% Bumi stake from the debt-laden Bakrie Group for $1 billion in January of last year. Mr. Tan said he has lost about $800 million as a result of that investment.

Bumi Chief Executive Nick Von Schirnding recently said at the company's annual general meeting that he was confident that Bumi was close to completing the final details of its separation agreement with the Bakrie Group. Aside from completing the deal, Bumi is also in dialogue with the Financial Conduct Authority to test its financial control systems in order to allow its shares to start trading.

Trading in Bumi's shares was suspended in April after the company discovered expenses at its 85%-owned PT Berau Coal Energy TBk (BRAU.JK) that had no clear business purpose.

-Write to Alex MacDonald at alex.macdonald@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires