Tinkler Group Moves to Acquire Whitehaven Coal

on Jul 18, 2012

Nathan Tinkler, 36, an Australian mining magnate made an offer for Whitehaven Coal Ltd’s (WHC) remaining stock at the price of A$5.20 (£3.42) per share, for a total of A$5.3 billion (approximately £3.5 billion). The Sydney-based company was in talks over a possible takeover in May last year, but rejected offers from India’s Aditya Birla Group and Peabody Energy Corp., because it felt the offers didn’t reflect the value of the company’s assets. However, a significant plunge in Whitehaven’s stock price now puts bidding once again on the table. A Tinlker-led group made a conditional bid of A$5.20 per share, taking advantage of the recent trading troubles of the Sydney-based company. Since June 13 Whitehaven shares have taken a serious hit, dropping 17 percent in price. On Monday, 16 it resumed trading at 23 percent less than the offered price.

Tinkler already holds 21.3 percent of Whitehaven, owner of seven mines in New South Wales State, but is now determined to acquire 100 percent ownership over the company. The move seems like a logical step, considering the increased demand for coal in China, India and Japan. Coal is heavily used in the production of steel and electricity, so the growing appetite of the two biggest emerging economies in the world and the heavily industrialised Japan isn’t surprising. It’s expected that this will lead to rising prices for the commodity.

!m[](/uploads/story/159/thumbs/pic_1_inline.png)The move, according to Nomura Australia Ltd, is “clearly not without risks”, but Tinkler has shown an eye for these kinds of deals in the past. A former electrician, he turned to the mining industry in 2006, when he sold his house to help fund the purchase of the A$30 million Middlemount coal lease in Australia’s Queensland state. A year later he sold the mine to Macarthur Coal Ltd. for about A$465 million in cash and shares. He later sold his shares in Macarthur to ArcelorMittal at a profit of A$445 million. This was the foundation of his business empire, which today includes coal and metals mining projects, infrastructure investments and more exotic business ventures such as owning a rugby team and a horse-breeding ranch.

“He knows the assets very well and would have confidence around the valuation,” said Andrew Driscoll, head of resources research at CLSA Ltd. in Hong Kong. He added that companies with quality assets and have shown good growth are attractive targets to investors.
Whitehaven Coal may be considered such a company. It owns seven coal mines in New South Wales, including the thermal coal Rocglen operations and the coking coal Maules Creek mine. The Sydney-based company managed to sell 1.4 million metric tonnes of coal in the first quarter of the year.
Overall $21 billion worth of mergers have been announced or completed this year in the industry according to Bloomberg.

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