October 25, 2011 / 6:20 AM / 6 years ago

Australia's New Hope mulls break-up as interest swirls: sources

HONG KONG (Reuters) - New Hope Corp (NHC.AX), the $5 billion Australian coal miner that put itself up for auction earlier this month is considering a break-up and asset sales amid interest from global resource companies, two sources said on Tuesday.

New Hope launched a formal sale process after receiving several unsolicited approaches as global miners comb the world for coal mines to feed booming Asian demand.

Among those interested in the Queensland-based thermal coal producer are India’s No.3 steelmaker, JSW Steel Ltd (JSTL.NS), China’s Yanzhou Coal Mining Co Ltd (1171.HK) and London-listed Xstrata XTA.L, according to the sources, who declined to be identified because they are not authorized to speak to the media.

New Hope’s wholly-owned port facility makes it attractive to potential suitors, but the sale process is complicated by its ownership structure and the high price tag, bankers and analysts said.

“New Hope is really flexible. Any reasonable offer for assets or the whole company will be welcomed,” one of the sources said. “The way ahead, given valuation expectations and global economic uncertainty, would be break up and sale of assets. They are not wedded to doing it one piece.”

New Hope is among the last few major coal companies left in resource-rich Australia after a flurry of recent takeovers consolidated the industry.

New Hope’s key assets include the New Acland mine, Colton Mine and some exploration assets.

The sources expect high interest for the New Acland project and said a data room could be set up in about a month if New Hope is satisfied with the preliminary bids.

    Officials with New Hope were not immediately available for comment, while Xstrata and Yanzhou officials declined to comment.

    Asset sales and distributing the cash as dividends could also be more tax effective for top shareholder Washington H Soul Pattinson (SOL.AX), which owns 59.7 percent of New Hope, analysts said.

    “We remain skeptical of a full sale of New Hope Corp given shareholder motivations, but believe there is the potential for some asset sales to eventuate as part of the formal sale process,” CLSA analysts said in a note.

    Shares of New Hope, which has a market capitalization of A$4.9 billion ($5.1 billion), fell 1.2 percent to A$5.96, while the benchmark S&P/ASX 200 index fell 0.6 percent.

    Meanwhile, U.S. coal giant Peabody Energy (BTU.N) and its bid partner, ArcelorMittal ISPA.AS, on Monday won majority interest in another Australian firm, Macarthur Coal MCC.AX, with their A$4.9 billion bid.

    Coal prices have been stable at more than $100 a tonne for most of the past year, aside from brief spikes after the Queensland floods and Japanese tsunami.

    Additional reporting by Sumeet Chatterjee, Alison Lui, Fayen Wong, Clara-Ferreira Marques; Editing by Lincoln Feast and Matt Driskill

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