Banpu Buys Centennial for $1.7 Billion in Thailand's Biggest Overseas Deal
Banpu CEO Chanin Vongkusolkit
Palani Mohan/Bloomberg
Banpu CEO Chanin Vongkusolkit poses outside his offices in Bangkok.
Banpu CEO Chanin Vongkusolkit poses outside his offices in Bangkok. Photographer: Palani Mohan/Bloomberg
July 5 (Bloomberg) -- Mike Elliott, Sydney-based global mining and metals sector leader for Ernst & Young LLP, speaks with Bloomberg's Susan Li about Australia's planned resources tax. Prime Minister Julia Gillard agreed to cut the planned tax to 30 percent from 40 percent and raise the levy’s trigger level, a week after ousting Kevin Rudd as the nation’s leader to defuse a row that’s damped the government’s election prospects. Elliott also discusses the outlook for the mining industry, and Banpu Pcl's agreement to pay A$2 billion for the 80 percent of Centennial Coal Co. it doesn’t own to take control of thermal and coking coal mines in Australia. (Source: Bloomberg)
July 6 (Bloomberg) -- Jeremy Sutcliffe, chief executive officer of CSR Ltd., talks with Bloomberg's Susan Li about the sale of the company's sugar unit to Wilmar International Ltd. Wilmar, the world’s largest palm oil trader, agreed to buy CSR’s sugar unit for A$1.75 billion ($1.5 billion), beating China’s Bright Food Group Co.’s bid for Australia’s biggest refiner. (Source: Bloomberg)
Centennial Coal CEO Bob Cameron poses for a photograph. Source: Centennial Coal Co. via Bloomberg
Banpu Pcl, Thailand’s biggest coal producer, agreed to buy the rest of Centennial Coal Co. for A$2 billion ($1.7 billion) in the nation’s biggest overseas takeover to secure supplies as prices climb.
Banpu will pay A$6.20 cash a share, 40 percent more than Centennial’s closing price on July 2, for the 80 percent of the producer it doesn’t own, the Sydney-based company said today in a statement. Centennial directors recommended the bid.
The deal gives Bangkok-based Banpu control of 10 mines in Australia, the world’s largest coal exporter, and power station customers in Japan and Europe. The Australian government’s decision last week to cut a planned new tax on mine profits may trigger more takeovers of resource companies.
The compromise has “unleashed some of the deals that were in the pipeline,” Mike Elliott, Sydney-based global mining and metals sector leader for Ernst & Young LLP, said in a Bloomberg News television interview from Sydney. “The takeover for Centennial Coal has certainly come about with the removal of some of that uncertainty.”
Thermal coal prices may rise to $110 a ton next year, from $98 this year, with demand driven by China and India, according to Deutsche Bank AG.
Drive Consolidation
Centennial surged 32 percent to A$5.83 in Sydney trading for the biggest gain since the shares started trading on Aug. 5, 1994. Banpu, which began building its stake in Centennial after the proposed profit tax was announced on May 2, rose 2 percent to close at 614 baht in Bangkok trading.
The company “is excited to have exposure to the Australian coal sector and believes that an acquisition of Centennial would be the initial step in driving further consolidation,” Chief Financial Officer Somruedee Chaimongkol said. “Banpu is seeking to play a long term role in the future development in the Australian coal industry.”
A total of $39.2 billion has been offered for Australian- based companies in announced deals in 2010, according to data compiled by Bloomberg. Today, Singapore-based Wilmar International Ltd. agreed to pay A$1.75 billion for CSR Ltd.’s Australian sugar unit.
The bid also boosted shares of rival Australian producers. Whitehaven Coal Ltd. gained 5.1 percent to settle at A$4.75, the highest close since June 30. Macarthur Coal Ltd. rose 5.2 percent to A$12.75, the highest since June 21. The benchmark S&P/ASX 200 Index dropped 0.4 percent.
Yanzhou, Peabody
Banpu’s offer is priced at 11.16 times Centennial’s earnings before interest, tax, depreciation and amortization. That’s almost double the 6.77 times EBITDA that Yanzhou Coal Mining Co. paid when it won Australian government approval for its A$3.5 billion takeover of Felix Resources Ltd. last year.
Peabody Energy Corp., the largest U.S. coal producer, in April offered A$4.1 billion for Brisbane-based Macarthur Coal, a steelmaking coal producer. The bid was reduced after the Australian government proposed a 40 percent tax on resource profits. Macarthur rejected the approach.
“Banpu has a well established trading arm supplying to other consumers in the north Asian region,” Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney, said by phone. “They have been a long established player in China. They’re probably looking to secure more supplies for consumption.”
Coal Demand
China’s appetite for imported coal remains the “wildcard” in the power station coal market, Goldman Sachs JBWere Pty Ltd. said in a June 28 note. The thermal coal market will swing into a deficit this year, with demand globally to outpace supply by 15 million metric tons, according to Deutsche Bank said in a June 30 report.
“Centennial is strategically placed to take advantage of strong demand for thermal coal, with long term domestic contracts expiring in coming years,” Chief Executive Officer Bob Cameron said.
Prime Minister Julia Gillard agreed to cut the planned profit tax to 30 percent from 40 percent and raise the levy’s trigger level, a week after ousting Kevin Rudd as the nation’s leader to defuse a row that’s damped the government’s election prospects. The compromise, announced on July 2, takes effect July 1, 2012, and apply only to coal and iron ore mines.
“The fact that the government’s resolution has just been announced meant that the price discussions we’ve been holding could take place with a greater degree of certainty,” Centennial’s Cameron said on a conference call with reporters.
Banpu has applied to Australia’s Foreign Investment Review Board to approve the deal, Centennial said. Banpu became Centennial Coal’s biggest shareholder in May.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
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