Australia's Tinkler pulls $5.5 billion Whitehaven bid

MELBOURNE/SYDNEY Fri Aug 24, 2012 12:39am EDT

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MELBOURNE/SYDNEY (Reuters) - Australian electrician-turned-mining magnate Nathan Tinkler has walked away from a $5.5 billion bid to take Whitehaven Coal (WHC.AX) private, Whitehaven said on Friday, with a source saying the businessman was unable to line up enough funds.

The decision knocked Whitehaven's share price down as much as 19 percent to a three-year low and marked the latest sign of a cooling in Australia's mining boom, dented by slowing growth in China.

Doubts had grown over the fate of the Whitehaven deal over the past two weeks after Tinkler failed to come up with a A$28 million payment to take a major stake in coal explorer Blackwood Resources BWD.AX and amid reports that he had tried to sell his horse farm.

"He possibly bit off more than he was able to chew in the current environment," said Wilson HTM analyst Andrew Pedler.

Tinkler, who made his fortune selling a coal tenement in 2007 and also owns the Newcastle Knights rugby league team and a horse racing and breeding operation, had offered A$5.20 a share for Whitehaven, well above its recent share price.

It is the second time in 16 months that Whitehaven has failed to sell itself. It scrapped an auction in May last year after offers from six suitors fell short of its expectations.

Tinkler was about A$900 million ($944 million) short on equity funding for the bid, said a source familiar with the deal who declined to be named as the talks were confidential.

Tinkler had lined up some other key shareholders in Whitehaven to roll over their stakes into an unlisted vehicle, but was unable to drum up support from others as he could not convince them there would be an exit route in a year or two.

Lenders who had agreed to provide A$2.0-A$2.5 billion were unwilling to cough up more amid a deteriorating coal market, warning that debt above that level would make Whitehaven unviable and unable to service its debt from cash flows.

"It suggests that the lenders or those providing the equity, someone, was nervous enough about market conditions not to go ahead," Wilson HTM's Pedler said.

Tinkler was not immediately available to comment.

TINKLER GAMBLE

Takeover activity in Australia's resources sector has shrunk 64 percent in the year to date to $28.6 billion, according to Thomson Reuters data, following a 20 percent slide in coal prices this year and a drop in iron ore prices to their lowest level since December 2009.

One of the few deals to go ahead was Whitehaven's takeover of Tinkler's Aston Resources and Boardwalk, which gave Tinkler a 21 percent stake in Whitehaven, making him the company's biggest shareholder.

Following the Whitehaven deal in May, Tinkler moved to Singapore and had been expected to sell down his stake. But instead, as Whitehaven's shares sank in line with sliding thermal coal prices, he decided to pounce on the company.

In July he was given a month to look over the books with a deadline of August 23.

Tinkler had lined up debt of up to A$2.5 billion from Barclays (BARC.L), JPMorgan (JPM.N) and UBS UBSN.VX, according to sources.

Whitehaven's shares sank to a low of A$2.83 on Friday and last traded down 11 percent at A$3.09. The slide meant the value of Tinkler's stake in the company has plunged 40 percent since Whitehaven took over Aston.

Whitehaven wants to expand production to 25 million tonnes a year by 2016 but is under pressure as thermal coal prices have slumped 20 percent this year to around $92 a tonne.

Adding to its woes, the group reported a 21 percent fall in underlying profit to A$57.8 million on Friday, hurt by slowing demand in China, supply competition from U.S. and Colombian exports, and rising costs due to heavy rain.

The result was well below analysts' forecasts at A$67 million, according to Thomson Reuters I/B/E/S. ($1 = 0.9576 Australian dollars) (Reporting by Sonali Paul; Editing by Richard Pullin)

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