Bloomberg News

Whitehaven Agrees to Buy Tinkler Assets for A$2.72 Billion

December 12, 2011

(Updates with closing share prices in fifth paragraph.)

Dec. 12 (Bloomberg) -- Whitehaven Coal Ltd. agreed to buy billionaire Nathan Tinkler’s Australian mining assets for at least A$2.72 billion ($2.77 billion) in stock, taking the value of coal deals this year to a record.

Whitehaven is paying A$10.85 a share for Tinkler’s publicly traded Aston Resources Ltd., 11 percent more than its close on Dec. 9. The 36-year-old will become Whitehaven’s biggest shareholder after also selling his closely held exploration unit Boardwalk Resources Pty for at least A$500 million in shares, according to a statement today.

Buying Aston gives Whitehaven control of the Maules Creek steelmaking coal project, which will more than double the company’s output by 2016. Rising demand for coal in China and India has pushed coal deals globally to a record $37.4 billion this year, compared with $36.7 billion last year.

“There is a certain amount of logic putting the two companies together,” Neil Boyd-Clark, an executive director at Arnhem Investment Management Pty in Sydney which manages A$3.5 billion in funds, said by phone. “China absolutely dominates the market for both coking and thermal coal.”

Whitehaven fell 1.4 percent to A$5.74 at the close of Sydney trading. Aston, based in Brisbane, rose 1.4 percent to A$9.90.

Coal deals involving companies in Australia, the world’s biggest exporter of the fuel, total 80 this year worth a record $11.4 billion, compared with last year’s $9.44 billion, according to data compiled by Bloomberg. The biggest was Peabody Energy Corp.’s $4 billion takeover of Macarthur Coal Ltd. in July. The average premium paid globally this year was 21 percent.

Aston Deal

The Aston deal is priced at 2.14 times its asset value, according to data compiled by Bloomberg. That compares with a median total asset value multiple of 3.06 times across seven comparable coal deals in Australia, the data show.

Tinkler will own about 19 percent of Whitehaven after the deal, making him its largest shareholder. He won’t join the board of the new company, Whitehaven Managing Director Tony Haggarty said on a call with reporters.

Tinkler, with a fortune of A$1.13 billion according to Business Review Weekly magazine, is Australia’s youngest billionaire. He is a former electrician turned resources entrepreneur, with business interests including coal mining, rail and port infrastructure and horse racing.

“The deal makes sense from a logistical point of view, that’s the main driver behind it,” Peter Rudd, mining and resource analyst at Armytage Private Ltd. in Melbourne, said by phone. “We’re likely to see more consolidation among smaller coal companies.”

Maules Creek

Aston’s Maules Creek project, which it bought for A$480 million in February 2010 from Rio Tinto Group, is located within 20 kilometers (12 miles) of Whitehaven’s Narrabri North mine in New South Wales state.

Shareholders of Aston will receive 1.89 Whitehaven shares for each of theirs and current Whitehaven holders will receive a special 50 Australian cent dividend. Boardwalk shareholders will get an extra 34 million Whitehaven shares, worth A$198 million, based on Whitehaven’s Dec. 9 closing price, on receipt of mining leases and environmental approvals at any two of Boardwalk’s five projects.

“By combining these assets we can ensure the most economic and sustainable development of the combined coal resources,” Whitehaven’s Haggarty, who will manage the new company, said in the statement. Mail Vaile, non-executive deputy chairman of Aston, will become independent chairman.

Takeover Target

The combined company may also be an attractive takeover target for Chinese or Indian companies seeking coal supply, Rudd said.

“When a company bulks up, it tends to become more attractive, especially for international parties,” he said.

Aston is being advised by UBS AG and Credit Suisse Group AG. Whitehaven is being advised by Goldman Sachs Australia Pty. and Grant Samuel and Associates Pty.

Maules Creek is scheduled to start output in the second quarter of 2013, with production rising to more than 10 million metric tons of semi-soft coking coal, used in steelmaking, from 2014 and will be using the same railroad and port as Whitehaven.

Whitehaven plans to boost production to almost 14 million tons of coal in the year ending June 30, 2014, it said in an Oct. 28 presentation. Whitehaven is forecast to earn net income of A$63 million in the six months to Dec. 31, according to data compiled by Bloomberg.

Global seaborne demand for coking coal will grow by 5 percent annually to 2025, as Chinese steel output increases to about 1.1 billion tons, BHP Billiton Ltd., the biggest exporter, said Sept. 30. Every ton of crude steel needs about 600 kilograms of metallurgical coal, BHP said at the time.

--Editors: Rebecca Keenan, Indranil Ghosh

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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