New Hope explores sale, could be $5 billion

SYDNEY Wed Oct 5, 2011 8:20am EDT

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SYDNEY (Reuters) - Australian coalminer New Hope Corp (NHC.AX) put itself up for auction on Wednesday after receiving several bid approaches, sending its market value surging 15 percent to almost A$5.1 billion.

The group said the approaches were informal and it would invite selected parties to bid, starting a process that could test Australia's openness to foreign mine owners.

New Hope would not name the interested parties. Analysts said firms in rapidly growing China and India were most likely among them although industry officials in India said New Hope might be too expensive for an Indian company to acquire.

A takeover of New Hope, which has its own port, would be the latest in a string of deals in Australia's coal sector, reflecting demand to feed Asia's strong growth.

The firm's shares rose 81 cents to A$6.10, valuing the company at A$5.1 billion ($4.8 billion), after touching a record high of A$6.50 early in the trading session.

New Hope Chairman Robert Millner hinted that New Hope could be a reluctant target, but the company was obligated to explore any deal that would give shareholders best value. The company has A$1.5 billion on its balance sheet and does not need a partner to fund its current expansion program.

"We have not been out shopping the company. We are going down this path purely because we have had these approaches from numerous third parties," Millner told Reuters.

He said they were "preliminary and incomplete proposals."

New Hope's open-cut New Acland mine, west of Brisbane, produces thermal coal used in power plants. New Hope sells about 65 percent of its coal overseas and the remaining to the domestic market. It exports via its own port at the Port of Brisbane.

A potential buyer could be China's Yanzhou Coal Mining Co (1171.HK), which earlier this year unsuccessfully bid for Australia's Whitehaven Coal (WHC.AX).

Murray Bailey, the managing director of Yanzhou's Australian operations, Yancoal, is a former chief operations officer at New Hope.

London-based bankers said that Anglo-Swiss miner Xstrata Plc XTA.L, its peer Anglo American (AAL.L) and commodity trader and miner Glencore (GLEN.L) might also be interested in New Hope.

"This is a region of the world where Xstrata is a major player and the product is important to them," one of the bankers said, although he added that he was not aware that any of those companies had appointed banks to work on a potential bid.

Indian firms like GVK Power & Infrastructure (GVKP.NS) and Adani have also been active in Australia.

Australia has scrutinized foreign bids very closely in recent years, especially those from state-linked Asian firms, and has at times rejected them or imposed strict conditions.

New Hope is 59.7 percent owned by diversified investor Washington H Soul Pattinson (SOL.AX), where Millner is also the chairman.

Millner said the two companies would consider the bids together. Soul Pattinson shares rose 9 percent to A$13.75.

New Hope had been talking to the interested parties for four to five months and would look at setting up a data room after indicative proposals came in within the next two months, he said.

"As there has been more and more interest we decided this was the best and fairest way to go down this process," he said.

Few independent coal miners remain in the Australian sector following a wave of consolidation.

"Clearly, as large shareholders, we see value in the stock. There is significant value in the company beyond just its coal mines, as it owns the port, a significant land bank as well as other listed investments and a significant amount of cash on the balance sheet," Perpetual portfolio manager James Bruce said.

Peabody Energy (BTU.N) and ArcelorMittal (ISPA.AS) won over Australia's Macarthur Coal MCC.AX with a sweetened A$4.9 billion offer in late August.

New Hope acquired Northern Energy (NEC.AX) this year after failing to secure a bid for Macarthur last year.

($1 = 1.06 Australian dollars)

(Additional reporting by Victoria Howley; Editing by Mark Bendeich, Matt Driskill and David Jones)

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