Shares in coal producer, Whitehaven Coal Limited (ASX: WHC) have fallen by over 10% this morning, after Nathan Tinkler withdrew his bid for the company. Tinkler had offered $5.20 cash per share for the remainder of shares that he did not already hold.
Investors had appeared to price in a significant chance of the bid failing. Shares in Whitehaven have traded at a significant discount to the offer price, since the Tinkler Group announced its proposal on 13 July 2012.
The signs were there that the deal was unlikely to proceed. As we mentioned a few weeks back, Nathan Tinkler’s private investment company, Mulsanne Resources, owed Blackwood Corp Ltd (ASX: BWD) $28.4 million and appeared unable to come up with the funds. That placed plenty of doubt over the possibility of Mr Tinkler raising the $5.3 billion needed to take over Whitehaven.
A report in today’s Australian Financial Review suggests that more bad news could be heading Mr Tinkler’s way. Apparently he has borrowed around $500m against his existing stake in Whitehaven. According to the company, the Tinkler Group holds 21.6% of Whitehaven’s shares. At the current price of around $3.08, Tinkler’s stake is worth less than $350m – well below the margin loan amount. That could lead to his margin lender selling off shares.
Whitehaven is Australia’s largest independent coal company by market capital and resources, ahead of New Hope Corporation (ASX: NHC) and Gloucester Coal Limited (ASX: GCL). The company has plans to ramp up production of coal from 6 million tonnes in 2012 to 25 million tonnes in 2016, but those plans could be in doubt after coal prices slumped by 20% this year to around $92 a tonne.
It’s doubtful that Mr Tinkler will be able to come back and make a successful lower bid, as the Whitehaven board are unlikely to support it – some broker analysts have valued the company at over $5.00. I’m sure we’ll hear more about this story in the weeks ahead.
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