Why did a major investor just offload $157 million in Whitehaven shares?

Whitehaven announced a $5 billion acquisition of BHP coal assets yesterday.

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Whitehaven Coal Ltd (ASX: WHC) shares are 1.78% lower on Thursday amid news that a major investor has sold $157 million in stock.

There is media speculation that the sale is a protest against the coal miner's purchase of more coal assets.

The Whitehaven share price is currently $7.44.

Major investor hits the sell button

As we reported yesterday, Whitehaven has proposed a $5 billion acquisition of the Daunia and Blackwater metallurgical coal mines owned by BHP Group Ltd (ASX: BHP) and Mitsubishi Alliance (BMA).

Whitehaven shares surged as high as 15% on the news, with management describing the deal as a "highly attractive acquisition for Whitehaven and is expected to be materially earnings accretive".

This morning, the Jefferies trading desk sold 21 million Whitehaven shares for about $157.5 million shortly after market open, according to the Australian Financial Review (AFR).

The trade represented about 2.5% of the company.

The AFR speculates that the seller could be hedge fund Bell Rock Capital, which opposed the BHP buy-up.

It's also possible that the seller may be another investor, who might have seen yesterday's surge in the Whitehaven share price as an opportunity to divest out of coal at a favourable price.

Why Whitehaven wants more coal in the era of decarbonisation

Whitehaven beat several other bidders for the coal assets. The AFR reports that Yancoal Australia Ltd (ASX: YAL) and Coronado Global Resources Inc (ASX: CRN) also made bids.

Management described "significant value upside with attractive growth opportunities in Queensland's Bowen Basin. This includes synergies with Whitehaven's Winchester South development project".

Whitehaven Coal's CEO and managing director, Paul Flynn, said the deal was "compelling" and "accelerates our strategy, transforms our company and delivers substantial value for our shareholders".

Flynn explained the reasoning behind the purchase:

This transformational acquisition will pivot our portfolio towards metallurgical coal, which has been a core pillar of our strategy for many years making this a better balanced business.

Our thermal coal business remains strategically important as we continue to provide much-needed coal products to support the global energy transition and as customers seek our high-quality and high-CV products to limit their emissions.

Whitehaven expects to close the deal before the end of FY24.

Whitehaven shares in 2023

The Whitehaven share price has fallen 16% in the year to date, alongside many other ASX coal shares.

Coal prices have been falling and are down by almost 65% over the past 12 months.

Motley Fool contributor Bronwyn Allen has positions in BHP Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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