Australia's New Hope scraps $5 bln-plus auction

Coal miner New Hope Corp has scrapped plans to sell itself

for more than $5 billion after a five-month sale process failed to seal a deal, a sign that

tighter credit has taken the sizzle out of Australia's hottest deal sector.

New Hope's shares slumped as much as 11 percent after it called off the sale, but clawed

back half the losses to trade above where it was before the auction.

New Hope reluctantly put itself up for sale in October after being approached by potential

suitors, with Indian conglomerates Tata Group and Aditya Birla, a Korean consortium and

China's Shenhua Group among those who had expressed interest, hungry to fill coal demand

for power plants and steel mills.

"We were never really willing sellers. With A$1.5 bln in the bank, I don't think we're

distressed in any way whatsoever," Managing Director Robert Neale told Reuters.

New Hope put itself up for sale under pressure from its 60 percent shareholder, Washington

H Soul Pattinson and Co . Soul Pattinson itself was being pressured by its own

shareholders, including Perpetual, to unlock value.

Portfolio managers at Perpetual, which also owns a 7 percent stake in New Hope, were not

available for comment on Thursday.

Investors had considered a New Hope sale unlikely in light of the company's high price

target for its unique mix of assets, local opposition to the expansion of its main coal

mine, at least one suitor turning to another target, and debt drying up for deals.

New Hope Chairman Robert Millner said access to debt and controversy over its Acland mine

expansion turning into an issue in the state of Queensland's upcoming elections, may have

been factors that put off bidders.

"Obviously around the world, money's getting harder to get your hands on," Millner told

Reuters.

Millner and Neale declined to comment on how much the company had expected to fetch for its

assets.

Analysts have said a price of up to A$5.8 billion for its coal assets alone would have been

fair as the coal is high-quality thermal coal for power stations and the company has

coveted port access.

"That's not over the top. They are really good assets. They've got a dedicated port, which

these days is worth an awful lot," said Peter Arden, an analyst at broker Ord Minnett.

"They've also been unfortunately caught up in a bit of a political storm over their main

coal asset. I think that would have been a really difficult scenario to conduct a fair sale

under," he said.

Arden also said the company's coal-to-liquids technology and other alternative energy

assets would be worth a further A$830 million.

'NO DEFINITIVE PROPOSAL'

The Queensland-based miner, one of the last substantial coal companies left after a string

of takeovers, said it had been in discussions with third parties on a number of incomplete

proposals right up to Wednesday.

"Discussions with those parties did not produce a definitive proposal which appropriately

reflects New Hope's strategic value and growth prospects and therefore the process has been

terminated," the company said in a statement to the Australian stock exchange on Thursday.

One of the key potential bidders, China's Yanzhou Coal Mining Co, chose instead to bid for

Australia's Gloucester Coal in December, combining assets in an A$700 million deal.

People close to the New Hope talks told Reuters earlier this month bidders pulled out

partly due to the size of the deal, which, at more than $5 billion, would have required

sizable debt raisings at a time when European credit markets were drying up.

Some bidders had explored buying individual assets rather than the whole company, but it

was never clear whether New Hope was willing to consider that route.

Millner and Neale declined to comment on any aspect of the discussions with the bidders or

say how many bidders were finally in the frame, except to say they were major overseas

companies.

New Hope's open-cut New Acland mine, west of Brisbane, produces thermal coal, with about 65

percent of its coal going overseas and the rest to the domestic market. The company also

has another mine called Colton and some exploration assets.

Unlike many other Australian miners desperate to raise funds for their projects, New Hope

has A$1.5 billion in cash and does not need a partner to finance its expansion program.

Two further Australian coal takeovers in process are expected to go ahead, with Yanzhou due

to release a bidder's statement for Gloucester soon, at the same time that rival Whitehaven

Coal releases deal documents on its A$2.7 billion takeover of Aston Resources.

ANOTHER SALE ATTEMPT LATER?

New Hope shares touched a high of A$6.42 in October after it put itself on the block, but

earlier this week were only 10 percent higher than before the auction, in line with the

broader market's gains over the same period, indicating investors doubted a deal would go

ahead.

Its shares ended down 4.9 percent at A$5.43, after hitting a low of A$5.11 immediately

after Thursday's announcement.

Chairman Millner, who is also chairman of Soul Pattinson, said he expected coal assets

would remain in demand and did not rule out considering a sale later this year.

"If someone comes back with an indicative offer -- who knows?" he told Reuters.

He pointed to rising thermal coal prices underpinning demand for coal assets.

"So there's no reason for the heat to come out of (the sector). If you read and hear around

the world, people are still very, very positive on thermal coal, copper and a couple of

other commodities," Millner said.

 

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