Bloomberg News

Tinkler’s Aston Holding Deal Talks With Whitehaven Coal

December 13, 2011

(Updates with closing share prices in sixth paragraph.)

Dec. 5 (Bloomberg) -- Billionaire Nathan Tinkler’s Aston Resources Ltd. is in talks to combine with Whitehaven Coal Ltd., valued at A$2.8 billion ($2.9 billion), in what would be the biggest coal deal in Australia since July.

Aston has “had discussions with Whitehaven Coal regarding a confidential, incomplete, non-binding merger of equals proposal,” Brisbane-based Aston said today in a statement. Shares of both companies rose, lifting the value of Aston’s stock by as much as 7 percent and Whitehaven’s by 2.7 percent.

Joining the two companies would combine Aston’s Maules Creek project in the Gunnedah Basin with nearby Whitehaven mines that produced 4.2 million metric tons of coal last year as demand from China and India grows. This year there have been 78 coal deals in Australia, the world’s biggest coal exporter, worth $9.35 billion, compared with last year’s record $9.44 billion, according to data compiled by Bloomberg.

“These guys are located right next to each other, sharing a lot of infrastructure, so there’s a lot of sense in something ultimately happening between the two,” Chris Drew, resources analyst with RBC Capital Markets in Sydney, said by phone.

Whitehaven, which put itself up for sale in October last year, ended the process in May, saying the offers it received didn’t reflect the value of its assets. Aston, chaired by its largest shareholder Tinkler, had a market value of A$1.9 billion as of Dec. 2.

Shares Gain

Aston climbed 4.2 percent to A$9.49 at the close of Sydney trading, taking its gain for the year to 18 percent. Whitehaven rose 1.2 percent to A$5.71.

The biggest coal deal in Australia this year was Peabody Energy Corp.’s $4 billion takeover of Macarthur Coal Ltd. in July. New Hope Corp., which has a market value of A$5 billion, said Nov. 30 it’s holding talks with “several” potential bidders after receiving takeover proposals. India’s Aditya Birla Group placed an indicative offer, according to two people with direct knowledge of the matter.

Globally, there have been $35.3 billion worth of coal takeovers this year, compared with the record $36.7 billion last year. The average premium for those deals was 22 percent, the data show.

Whitehaven had cash and near-cash items of A$141 million as of Dec. 31, while Aston had cash of A$342 million.

Adjacent Operation

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

Whitehaven plans to boost production to almost 14 million tons of coal for fiscal 2014 ending June 30, it said in a 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.

“Whitehaven continues to investigate value enhancing opportunities on behalf of its shareholders,” Tony Haggarty, managing director, said in a separate statement.

Demand Growth

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.

Tinkler, a former electrician turned resources entrepreneur, has business interests including coal mining, rail and port infrastructure and horse racing. He’s Australia’s wealthiest person aged 40 years or less, according to Business Review Weekly, which estimates his fortune at A$1.13 billion, and is the first billionaire to be included on BRW’s “Young Rich” list.

On Nov. 29, Tinkler proposed building a A$2.5 billion coal export terminal in Newcastle, the world’s biggest port for thermal coal, to ferry coal from Aston and other projects to global markets. The plan competes with one submitted by the current operator Port Waratah Coal Services Ltd.

The terminal will add 100 million tons of annual capacity for coal exports if approved by the state government, Tinkler’s Hunter Ports said. That would double the amount being shipped annually from the harbor in New South Wales. Port Waratah is proposing a A$5 billion expansion to add 120 million tons of capacity.

--Editors: Andrew Hobbs, Rebecca Keenan

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

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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