Hong Kong-headquartered commodities trading company Noble Group yesterday increased its all-cash offer for Gloucester Coal by 24% to an equity value of A$490 million ($368 million), only days after regulators in Australia ruled that Gloucester's directors are the deciding authority for Noble's bid.
Noble is now offering A$6 per share for the 78.3% of Gloucester it does not own, up from an offer of A$4.85 it tabled on February 27. For shareholders who tender, the A$6 will yield them a premium of 91% to the closing price of Gloucester's shares on February 19, the last trading day prior to the announcement of the Whitehaven Coal merger, which Noble is trying to stop. The offer also represents an 87% premium to the thee-month volume-weighted average price before February 19 and a 24% premium to the price at which Gloucester traded on Monday, May 4.
Noble, via its wholly owned subsidiary Paway, is Gloucester's largest shareholder with a 21.7% stake. It is currently also Gloucester's largest customer.
At the enhanced price, the deal will result in an outlay of A$384 million for the company.
Other large shareholders in Gloucester include: Brisbane-based natural resources investor AMCI Investments with a 9.8% holding; Barclays Global Investors with 9.17%; and Japanese trading company Itochu Corporation's Australian subsidiary, Itochu Minerals, which owns 5.1%.
Noble's offer was precipitated by Gloucester announcing a reverse merger deal with Whitehaven Coal in February. Sydney-based Whitehaven group develops and operates coal projects in New South Wales.
Boards of both Australian companies are 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.
Structuring the deal as a reverse merger ensures that Gloucester's shareholders do not have to vote on the merger. As Whitehaven is substantially owned by its directors, securing approval among its shareholders for a deal recommended by its directors should be relatively straightforward.
Noble appealed to Australia's Takeovers Panel that Gloucester shareholders should be allowed to vote on the Whitehaven merger. However, the Takeovers Panel did not rule in Noble's favour and instead left the decision to endorse the Whitehaven merger with the Gloucester directors. And, expectedly, on April 30, the Gloucester and Whitehaven boards both recommended the merger.
"The merger will create a major Australian coal company with greater liquidity for Whitehaven shareholders and a market capitalisation of approximately A$1.2 billion," Gloucester chairman Andy Hogendijk said in a letter to Whitehaven shareholders.
Noble's offer is contingent upon Gloucester's pending bid for Whitehaven being terminated.
Noble has already received approval from Australia's Foreign Investment Review Board (FIRB) to increase its stake in Gloucester Coal to 100%.
"We believe the substantial uplift in our cash offer requires Gloucester's board to now act in the interests of all Gloucester shareholders and declare Noble's offer as superior to the Whitehaven merger immediately," Will Randall, director of Noble Energy, said yesterday in a written statement. "The clock is ticking on the Whitehaven merger, and only the Gloucester directors have the ability to stop that clock, and give their shareholders the chance to review our generous cash offer."
Gloucester said it was considering the offer and would respond in due course. It advised shareholders to take no action in the meantime. Under the terms of the Takeovers Panel's orders, Gloucester's bid for Whitehaven is conditional on no superior proposal emerging up to at least May 21.
Noble is being advised by Citi. Gloucester Coal is taking financial advice from UBS and legal advice from Freehills. Whitehaven has hired Grant Samuel and Wilson HTM as financial advisers, while McCullough Robertson is providing it with legal advice.
Gloucester's share price gained almost fifty cents to close at A$5.90 yesterday.