Bloomberg reported that mining magnate Mr Nathan Tinkler will stand by his bid for Whitehaven Coal Limited which values the target at AUD 5.3 billion saying holders would be unlikely to accept a lower offer.
Tinkler said that “I don’t think the board would accept. There comes a line where you’re buying things at value and one where you’re not going to get a deal done.”
Whitehaven owner of seven coal mine assets in Australia was trading about 30% below the offer of AUD 5.20 per share before the interview. Tinkler, Whitehaven’s biggest shareholder was considering lowering the price after its shares slumped and coal prices weakened.
The electrician turned miner made the bid after Whitehaven disclosed an initial approach on June 13th 2012. The Tinkler Group Pty offer is subject to a monthlong study of Whitehaven’s books. Planned debt funding for the deal with letters of support from UBS AG, JPMorgan Chase & Company and Barclays Plc is also dependent on successful due diligence.
Whitehaven ended the day 3.1% higher at AUD 3.66 for the biggest gain since July 19th 2012. Its shares have slumped 31% since the start of the year.
Mr Tinkler said that “The market is valuing assets very differently to how long-term investors value them. The market is probably valuing things at half of what they’re really worth in particular when you have a suite of assets that are in development.”
Mr Tinkler’s group has advised Whitehaven that about 48.3% of the company’s shareholders had expressed interest in becoming stakeholders in the new company, subject to a satisfactory due diligence process, Whitehaven said July 13th 2012. Another 16.7% of shareholders may also join, equating to 65%.
Mr Tinkler said that bank representatives traveled to mine sites last week and will determine how much they’ll lend. The loan will probably be somewhat lower than an amount of AUD 2.5 billion, specified by two people familiar with the situation on June 18th 2012.
He said that “I’d be comfortable with a gearing level of about 40 percent to 50%. The new company would consider selling stakes in its coal assets to help with funding, including the key Narrabri and Maules Creek mines with potential stake sales of an additional 10%.”
Benchmark Asian thermal coal prices have tumbled 28% this year because of weaker demand in India and China as economic growth slows. Prices have also been pressured by US producers increasing exports as plunging domestic gas prices prompt utilities to switch to gas. About 69% of Whitehaven’s production was thermal coal in the year ended June 30th 2012.
Mr Paul McTaggart resources analyst with Credit Suisse said that Mr Tinkler has two main hurdles to overcome to get the deal done. The first is to convince 65% of shareholders to transfer their Whitehaven shares into a company that isn’t publicly traded and contribute further equity. The second is to raise an estimated AUD 1.85 billion to buy out the remaining 35 percent of shareholders.
Mr McTaggart said that assuming additional debt of AUD 1.85 billion, the company’s gearing will rise to 70% a level the company would find challenging to support.
Source - Bloomberg.net
(www.coalguru.com)
