UPDATE: Whitehaven In Discussions With Aston On Coal Merger
05 December 2011 - 12:08PM
Dow Jones News
Australian coal miners Whitehaven Coal Ltd. (WHC.AU) and Aston
Resources Ltd. (AZT.AU) are in discussions over a potential 4.65
billion Australian dollar (US$4.76 billion) merger, the companies
said Monday.
Any deal would lift a combined company to the first rank of
Australian coal producers. Whitehaven plans to be mining 15 million
metric tons a year by 2015 while Aston hopes to build up to 12
million tons a year by the same date. That would give the two
miners combined output comparable to that of Peabody Energy Corp.'s
(BTU) Australian operations, which accounted for 27 million metric
tons in 2010.
Both companies said the talks to create a "merger of equals"
between the miners were "incomplete". In a statement, Whitehaven
Managing Director Tony Haggarty said the discussions are at an
early stage and there is no guarantee of success.
"It is unclear at this stage as to whether the terms of any such
potential transaction would be suitable to put to Whitehaven
shareholders," he said.
Aston said in a statement that the company was still committed
to its existing plans, for "growth of the company on a standalone
basis", but added that it was exploring "other alternatives".
Analysts questioned whether such a deal between two famously
tough-minded management teams could work out.
"The merger scenario doesn't make a whole lot of sense to me,"
said James Stewart, an analyst at CLSA in Sydney. "Given the
personalities involved, I' not convinced that either of these
gentlemen would agree to be diluted in a merger agreement."
Aston's founder Nathan Tinkler has a 38.24% stake in the miner,
and seized control of the company in a boardroom coup last month
that saw him installed as Chairman.
He has a reputation as an astute dealmaker. Aston's main mine,
Maules Creek, was bought for A$480 million from Rio Tinto PLC
(RIO)-controlled Coal & Allied Industries Ltd. (CNA.AU) in
2009, but the company's 75% stake is now worth A$2.78 billion,
based on the A$370 million that Electric Power Development Co. Ltd.
(9513.TO), or J-Power, offered for a 10% stake last month.
Whitehaven's Haggarty is also known for driving a hard bargain.
In May, the company gave up a seven-month search for a takeover
suitor, saying that "no proposal is sufficiently attractive".
A combination would put together the two largest miners in the
Gunnedah Basin, an emerging coal region north of the Hunter Valley,
allowing them to combine rail and port capacity on the choked
transport network to Newcastle, the world's largest export coal
harbor.
At 0020 GMT, Aston shares were up 4.6% at A$9.53 and Whitehaven
had climbed 1.8% to A$5.74.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;
david.fickling@dowjones.com
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