SYDNEY/MELBOURNE (Reuters) - Whitehaven Coal (WHC.AX), Australia’s second-biggest independent coal producer, said it has received a buyout approach from its top shareholder, billionaire Nathan Tinkler, but bankers and analysts doubted a deal could be put together.
Whitehaven’s shares shot up 9 percent after the announcement on Wednesday but later drifted back on skepticism over a deal going ahead, as tight access to debt would make it tough to finance a bid for the company, valued at $4.4 billion.
“It’s at an early stage with some substantial funding question marks. The funding would be the challenge,” said Chris Drew, an analyst at RBC Capital Markets in Sydney.
Tinkler would have to offer a solid premium to satisfy Whitehaven’s board, which just over a year ago scrapped an auction of the company after receiving unacceptable offers from around six suitors.
Whitehaven said Tinkler Group’s proposal was too incomplete to be considered but left the door open to a bid, saying it has set up a committee of independent directors to consider any further proposal.
“It’d be an uphill task for Tinkler to take it private. He’d need plenty of equity and backing, which is a luxury right now,” said a source who has worked on recent industry deals.
A former electrician, Tinkler, 36, had been widely expected to sell down his 21 percent stake in Whitehaven, which in April paid about $2.7 billion for Tinkler’s Aston Resources and his exploration company Boardwalk Resources.
However, he has instead turned his attention to taking over the business, driven by recent share price weakness and plans to speed up development of Whitehaven’s projects, a source with knowledge of the deal said.
Whitehaven and a spokesman for Tinkler Group declined to elaborate on the tentative proposal or identify who might be working with Tinkler on the bid.
Whitehaven notably has not appointed any major investment bank as a defense adviser. Last year it hired Goldman Sachs (GS.N) to advise on the auction of the company.
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.
He also rescued the Newcastle Jets Australian A-League soccer club, tried to dump it, then held on to it after winning concessions from another Australian billionaire, shopping mall magnate Frank Lowy, who heads Australia’s football federation.
Tinkler, who recently moved to Singapore, would need backers for the Whitehaven bid and there is industry speculation he could seek a mix of partners, including coal customers and investment firms. He is being advised by Queen Street Capital, a boutique firm that he owns.
Whitehaven has an off-take agreement with Japan’s Electric power Development Co (J-Power) (9513.T), which recently bought a 10 percent stake in Whitehaven’s Maules Creek project. The mine, the big prize in Whitehaven’s takeover of Aston, is also 15 percent owned by Itochu Corp (8001.T).
Other names mentioned as potential partners in a bid are investment firms Farallon Capital and its subsidiary Noonday Capital, which have worked with Tinkler in the past.
Whitehaven’s output is expected to rise from 6 million tonnes a year in 2012 to 25 million tonnes by 2016, when about 60 percent of output will be coking coal for steel mills.
At least half of the companies that put in bids for Whitehaven last year are unlikely to pounce now, including U.S. coal miner Peabody Energy (BTU.N), which has since taken over Macarthur Coal, and China’s Yanzhou Coal (1171.HK), which is now in the process of taking over Gloucester Coal GCL.AX.
Whitehaven’s shares jumped to a high of A$4.36 after the buyout approach was announced and closed up 4.5 percent at A$4.18, valuing the company at A$4.2 billion ($4.2 billion).
Ahead of the approach, the stock had slumped 23 percent since the takeover of Aston was sealed in early May. The fall is in line with other coal miners, like Yanzhou and Peabody, amid a drop in coal prices due to worries about soft Chinese growth.
($1 = 1.0102 Australian dollars)
Editing by Richard Pullin