Tinkler abandons US$5.5bn Whitehaven bid as Oz mining boom loses steam

PUBLISHED : Friday, 24 August, 2012, 9:27am
UPDATED : Friday, 24 August, 2012, 10:46am

Nathan Tinkler has walked away from a US$5.5 billion bid to take Australia’s Whitehaven Coal private, Whitehaven said on Friday, with a source saying the electrician-turned-mining magnate was unable to line up enough funds.

The decision came two months after Whitehaven’s biggest shareholder approached it with a takeover proposal and marked the latest sign of a cooling in Australia’s mining boom, dented by slowing growth in China.

“The due diligence period expired yesterday and Whitehaven has now been advised by the Tinkler Group that a formal binding proposal of A$5.20 cash per share will not be forthcoming,” Whitehaven said.

Whitehaven shares sank as much as 19 percent to a three-year low of A$2.83 in early trade.

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 and amid reports that he tried to sell his horse farm.

This 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.

And 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.

Tinkler was not immediately available to comment.

Tinkler became Whitehaven’s biggest shareholder earlier this year after the company bought his Aston Resources, coveted for its Maules Creek mine.

Following that deal, he 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, JPMorgan and UBS, according to sources.

The market had put low odds on a deal going ahead, with Whitehaven’s shares trading a third below the proposed offer before the bid was scrapped.

Tinkler, with a taste for fast cars, made his fortune selling a coal tenement to Macarthur Coal in 2007 and now owns the Newcastle Knights rugby league team and a horse racing and breeding operation, which he picked up when the industry was hit by equine flu.

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

Adding to its woes, the company also announced a 21 per cent fall in underlying annual profit on Friday to A$57.8 million as wet weather pushed up mining costs.
Second-half net profit before one-offs fell 11 per cent to A$35.8 million, according to Reuters calculations, sharply below analysts’ forecasts of around A$45 million, according to Thomson Reuters I/B/E/S.
The company said on Friday it was open to considering takeover proposals, but “would remain focused on developing the company’s portfolio of high quality coal assets to deliver value for all shareholders.”