Tinkler’s bid for Whitehaven on the rocks?

Whitehaven Coal Limited (ASX: WHC) received a takeover offer from mining magnate Nathan Tinkler’s Tinkler Group back on the 13th July this year, valuing the company at $5.20 cash per share.

Whitehaven’s shares are trading at $3.55, a massive discount to the offer price, and almost falling back to 52 week lows. Investors appear to be indicating that the takeover will not go ahead, and newspaper reports suggest they may be right.

Just yesterday, Blackwood Corp Ltd (ASX: BWD) advised that Mr Tinkler’s private investment company, Mulsanne Resources, had been given an extension to find $28.4m for a stake in the company. Back in May, Mr Tinkler agreed to be become a majority shareholder in Blackwood with 33.85% of the company. It appears that he may be having trouble coming up with the funds, so investors, probably quite rightly, are questioning whether he’s going to be able to raise $5.3 billion to take over Whitehaven.

According to the Sydney Morning Herald, a representative for Mr Tinkler denied any connection between the Blackwood and Whitehaven deals. The spokesperson went on to say that there had been a delay finishing the Blackwood deal documentation, which could take another few weeks.

Compounding his problems are the fact that coal prices have fallen to a two year low, and have fallen 20% since April 2012. With a 21% holding in Whitehaven, much of Mr Tinkler’s wealth is tied up in the company, and with the falling share price, it may be difficult for him to raise the funds necessary to complete the takeover.

The Whitehaven takeover is the latest in a series of coal mergers and acquisitions with many coal miners leaving the ASX, with just a handful of independent miners left. (New Hope Corporation (ASX: NHC), which is currently the largest miner by market cap, is majority owned by Washington H Soul Pattinson (ASX: SOL), with a 60% shareholding.)

Apart from Whitehaven, most of the other listed coal companies on the ASX are explorers, rather than producers of coal.

Foolish takeaway

Nathan Tinkler may walk away from the Whitehaven deal, or even come back with a lower offer, given the rapid fall in coal prices. That’s if he can find funding of course, which he may be struggling with.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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