July 16 (Bloomberg) -- Australian mining magnate Nathan Tinkler offered to buy the rest of Whitehaven Coal Ltd. with an offer valuing it at A$5.3 billion ($5.4 billion) after a share plunge since his initial proposal last month.
A Tinkler-led group made a conditional bid of A$5.20 cash for each share of the owner of seven mines in New South Wales state, Whitehaven said in a July 13 statement. The Sydney-based company resumed trading today at 23 percent less than the offer price.
Tinkler, 36, an electrician-turned-miner, is taking advantage of a 17 percent slump in Whitehaven shares since June 13 when the miner rejected an initial offer that didn’t disclose terms. The bid, which is subject to Tinkler’s group securing funding, is “clearly not without risks,” Nomura Australia Ltd. said in an e-mailed research note.
“It’s highly conditional on the fund package and the due diligence process,” Ric Ronge, who helps manage about $1 billion at Pengana Global Resources Fund, including Whitehaven shares, said by phone.
Whitehaven traded 59 cents higher at A$4.04 at 11:22 a.m. in Sydney after rising as much as 21 percent. Tinkler holds 21.3 percent of Whitehaven, according to data compiled by Bloomberg.
“The key to this bid is Tinkler securing debt funding,” said Andrew Driscoll, head of resources research at CLSA Ltd. in Hong Kong. “He knows the assets very well and would have confidence around the valuation. Companies that have good quality assets and good growth profiles are still very attractive investment propositions.”
Increasing demand for coal in China, India and Japan may boost prices for the commodity used to produce steel and generate electricity.
Tinkler Group has advised Whitehaven that about 48.3 percent of the company’s shareholders had expressed interest in becoming stakeholders in the new company, Whitehaven said.
An independent committee concluded it will allow Tinkler four weeks to conduct due diligence to develop the proposal, Whitehaven said. The bidder has conditional letters of support from UBS AG, JPMorgan Chase & Co. and Barclays Plc.
There were 15 “buy” ratings, one “hold” and one “sell” out of the 17 analyst recommendations compiled by Bloomberg. The average price target of analysts for the stock was A$4.65 before the bid was announced.
Whitehaven’s assets in New South Wales include the coking coal Maules Creek mine, the thermal coal Rocglen operations, as well as Sunnyside, Vickery, Werris Creek, and Tarrawonga, according to its website. The company sold 1.4 million metric tons in the first quarter, according to a regulatory filing.
There have been $21 billion of mergers and acquisition deals in the coal industry announced or completed this year, data compiled by Bloomberg show. The average premium for the deals was 15 percent.
The latest takeover offer is priced at 3.69 times the assets, according to data compiled by Bloomberg. That compares with the median of 2.27 times for 10 comparable deals.
The independent board committee appointed to examine bids after Tinkler’s initial approach is being advised by Grant Samuel Corporate Finance and Corrs Chambers Westgarth, according to the statement.
Whitehaven ended talks for a possible takeover in May last year after saying purchase proposals failed to reflect the value of its assets. Final bidders included India’s Aditya Birla Group and Peabody Energy Corp., the Australian Financial Review reported at the time, without citing anybody.
Yanzhou Coal Mining Co., which bought Australian coal company Felix Resources Ltd. in 2009 for A$3.1 billion in China’s biggest resources takeover, “looked at” Whitehaven, Board Secretary Zhang Baocai said in April last year.
Tinkler’s business journey began when he sold his house in 2006 to help buy the A$30 million Middlemount coal lease in Australia’s Queensland state before selling it a year later to Macarthur Coal Ltd. for about A$465 million in cash and shares.
In May 2008, Tinkler sold his Macarthur stake to ArcelorMittal, the world’s largest steelmaker, at a profit of about A$445 million. He then bought Maules Creek from Rio Tinto Group for A$480 million in August 2010. Seeking funds to develop the project, Tinkler listed Aston Resources, containing Maules Creek, in August 2010, raising A$400 million.
Tinkler and his companies also own coal and metals mining projects, infrastructure investments, a horse-breeding operation, and the Newcastle Knights, a rugby league team in the Australian coal port of Newcastle.
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