Banpu Plc, Thailand’s biggest coal producer, agreed to buy the shares it doesn’t already own in Hunnu Coal Ltd., valuing the Australian explorer seeking to develop mines in Mongolia at A$477 million ($493 million).
Banpu, which owns about 12 percent of Hunnu Coal, is offering A$1.80 cash for each share, the Bangkok-based company said today in a statement. That’s 30 percent more than the Sept. 8 close of the Perth-based company, whose board today unanimously recommended the bid.
Buying Hunnu will give Banpu full control of a company that owns 11 coking and thermal coal projects in Mongolia, home to one of the world’s largest unexploited reserves of the fuel. Banpu, which last year agreed to buy Australia’s Centennial Coal Co., has said Mongolia’s coal industry has great potential because of its closeness to markets including China.
“This bid by Banpu takes a lot of pressure off Hunnu’s management and it’s not surprising that they recommended this bid because it basically removes any pressure on them to finance these projects,” said Matthew Whittall, a Hong Kong-based analyst at Renaissance Capital Ltd. “They have large resources that are close to China.”
Hunnu Coal climbed 25 percent to A$1.725 at the 4:10 p.m. Sydney time close on the Australian stock exchange, its biggest gain since February last year. The shares were halted on Sept. 9. Banpu fell 1.3 percent to 626 baht at 12:36 p.m. in Bangkok.
Mongolia’s coal production doubled last year to 25 million metric tons to become the nation’s top export earner, as demand gained in China and India, the world’s fastest growing major economies. Prices of coking coal, used by steel mills, and thermal coal, used by power stations, reached records this year.
Banpu’s offer is 51 percent higher than Hunnu’s 20-day share price average, while 19 similar-sized Australian coal acquisitions in the past five years have an average premium of 60 percent, according to data compiled by Bloomberg.
“Banpu’s share offer for Hunnu is at a significant premium to recent trading levels and has regard to the strong prospects of Hunnu’s coking and thermal coal deposits,” Banpu Chief Executive Officer Chanin Vongkusolkit said in a statement.
There were $20.15 billion of takeover bids for coal-mining companies valued at $100 million or more in the first nine months of this year, compared with $7.06 billion a year earlier, according to data compiled by Bloomberg.
Citigroup Inc. in July raised its 2013 estimates for hard coking coal by 30 percent and thermal coal by 36 percent, citing limited new supplies of coking coal and more use of thermal coal for electricity and increased Chinese and Indian imports.
Banpu wants to acquire Hunnu because it “is an advanced exploration company with two advanced projects and the valuation is relatively cheap,” said Renaissance Capital’s Whittall.
Banpu, which agreed in March to pay A$45 million to become the largest shareholder in Hunnu Coal, is being advised by JPMorgan Chase & Co. and Allen & Overy.