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Australian businessman Nathan Tinkler has made a A$5.3bn bid to take mining group Whitehaven Coal private, taking advantage of the drop in coal prices caused by doubts about the strength of the Chinese economy.
The 36-year-old Mr Tinkler, who made his fortune in coal but also owns a racing stable and Newcastle Knights rugby league team, is Whitehaven’s largest shareholder.
He gained his 21 per cent stake in the company last year when he sold two mining businesses, Aston Resources and Boardwalk Resources, to Whitehaven for A$2.6bn in stock.
He had been expected to sell down his stake, but instead last month approached Whitehaven with a buyout proposal.
The company dismissed Mr Tinkler’s approach as “highly conditional and incomplete” but left the door open to a revised offer saying it had set up an independent committee of directors “to consider any further developments”.
On Friday Whitehaven said it had received an indicative and non-binding proposal from a vehicle led by Mr Tinkler to take Whitehaven private at a price of $5.20 a share.
This represents a premium of 50 per cent to Whitehaven’s closing share price on Friday of $3.45 but is line with where the stock traded for most of last year, before worries set in about a possible economic slowdown in China.
Australian thermal coal prices have fallen about 20 per cent this year to about $90 per tonne, hitting coal miners’ profits and potentially slowing down mine expansion plans.
Whitehaven said Tinkler Group claimed to have support for its buyout plan from shareholders representing 48.3 per cent of the miner’s shares.
The proposal also had support from UBS, JP Morgan and Barclays banks, although Whitehaven said “firm commitment of debt funds for the transaction remain subject to satisfactory completion of due diligence and detailed documentation”.
Whitehaven added that the independent committee of directors had concluded it was in the best interests of shareholders “to enable Tinkler Group to conduct due diligence in order to further develop its proposal”.
Whitehaven has agreed not to solicit other bids for four weeks.
The group is one of Australia’s last remaining independent coal producers following a string of takeovers, including Peabody Energy’s acquisition of Macarthur Coal and Gloucester Coal’s takeover by Yanzhou Coal of China.
Whitehaven’s main assets are producing coal mines and undeveloped coal deposits in the Gunnedah Basin in New South Wales.