Hong Kong-headquartered commodities trading company Noble Group has made an all-cash offer to acquire the 78.3% shareholding in Gloucester Coal it does not already own at a cost of A$310 million ($201 million), or A$4.85 per share. The offer is not conditional on a minimum acceptance level, but is subject to Gloucester Coal's pending bid for Whitehaven Coal being withdrawn or otherwise terminated. Noble has already received approval from Australia's Foreign Investment Review Board (FIRB) to increase its stake in Gloucester Coal to 100%.
The offer price represents a 54.2% premium to Gloucester Coal's closing price on the Australian Stock Exchange on February 19, the last trading day prior to the announcement of the merger between Whitehaven and Gloucester Coal, and a 48.4% premium to the one- month volume-weighted average price of Gloucester Coal in the month prior to the Whitehaven announcement. Noble will fund the offer through cash on its balance sheet.
Noble's wholly-owned subsidiary, Paway, is currently the largest shareholder of Gloucester Coal with a 21.7% stake. In the 12 months prior to the announcement, Paway purchased approximately 2% of the issued shares in Gloucester Coal for A$20.2 million. Noble first became a shareholder in the company in 2007 when Gloucester Coal received an unsolicited takeover offer from Xstrata. Noble is currently also Gloucester Coal's largest customer.
Gloucester Coal has been in play since it announced a merger deal with Whitehaven on February 19. The deal is structured as a reverse merger whereby Gloucester Coal will issue one of its own shares for every 2.45 Whitehaven shares. The deal will result in Whitehaven's shareholders owning around 67% of the merged entity and give Whitehaven majority control of the Gloucester Coal board. The deal structure ensures that Gloucester Coal's shareholders do not have to vote on the deal and so Noble cannot use its shareholding to block the deal.
The boards of both Gloucester Coal and Whitehaven are unanimously recommending the merger to shareholders on the grounds that it will create a coal company with: significant synergies; a portfolio of stable, low risk and low cost operations; greater product diversity and more financial flexibility. The merger is subject to 80% acceptance by Whitehaven shareholders and approval by FIRB.
Noble, which hired veteran Citi-banker Jeremy Amias as chief operating officer for finance in 2007, is being advised on its bid by Citi. UBS is advising Gloucester Coal and Freehills is providing legal advice. Whitehaven has hired Grant Samuel and Wilson HTM as financial advisers, while McCullough Robertson is providing it with legal advice.
According to Noble, the Gloucester Coal-Whitehaven merger implies a value for Gloucester Coal's shares of A$3.65 each (on an ex-dividend basis), making Noble's own all-cash offer at A$4.85 per share clearly superior as it represents a 32.9% premium to the all-scrip Whitehaven deal.
Gloucester Coal is an independent mining company with exploration and mining activities in the Gloucester Basin 100 kilometres north of Newcastle in New South Wales. It exports both thermal and coking coal products.
The Noble Group is a Singapore-listed commodity trader which operates from over 100 offices in more than 40 countries and had revenues exceeding $36 billion in 2008. It has a stated strategy to own and manage strategic coal assets, sourcing from producers in low cost regions, such as Australia.
Gloucester Coal on Friday noted the Noble Group offer and said it will advise shareholders of its recommendation shortly.