Universal Coal’s (ASX: UNV) board has issued a “no action” statement in response to coal miner TerraCom’s (ASX: TER) unsolicited takeover bid, which estimated the combined entity would have an $294 million market capitalisation and shoulder into the ASX 300.
TerraCom is offering $0.335 per Universal Coal security with the bid to comprise $0.10 in cash plus 0.6026 new TerraCom shares.
According to TerraCom, its offer represents a 42.6% premium to Universal Coal’s last closing price of $0.235.
The company noted it had received “overwhelming support” from Universal Coal’s existing institutional investors, with 27.3% secured under irrevocable undertakings.
Combined with TerraCom’s existing 19.995% holding, this represents 47.3% of Universal Coal holders committed to the takeover going forward.
If the takeover went forward, Universal Coal holders would own 33.4% of the merged entity.
TerraCom stated it was “delighted” to make the offer to Universal Coal shareholders, claiming the combined entity would provide “additional value” for both Universal Coal and TerraCom shareholders.
“The offer will allow both companies to continue to run successful coal operations, with the improved benefit of geographic diversity and an expanded production footprint and also provide a substantial platform for future growth and development of the wider business.”
In response to TerraCom’s offer, Universal Coal pointed out the “overwhelming support” for the takeover from investors constitutes only four shareholders, with three of those “related to each other”.
Universal Coal also noted the bid did not include an offer document.
Moving forward, Universal Coal’s independent directors will meet to evaluate the offer and make an official statement on either accepting or rejecting the bid.
A combined TerraCom and Universal Coal
It is expected a combined entity would create a mid-tier coal producer with higher asset and country diversification.
Looking at Universal Coal’s latest financial results, the company posted group earnings before interest tax depreciation and amortisation for the December quarter of $15 million, with $8.7 million attributable to the company.
Underpinning the EBITDA was a 10% rise in run of mine coal production of 2.37 million tonnes compared to the previous corresponding period.
Additionally, the December quarter saw Universal Coal boost export sales by 48% compared to the September period.
However, group coal sales dipped to 1.7Mt – down 4% of the previous corresponding period.
Meanwhile, TerraCom revealed this morning it had achieved record coal sales of 1.66Mt for the six months ending 31 December – beating the previous record by 7%.
Contributing to the record was increased Blair Athol coal mine sales of 1.41Mt.
Group operating EBITDA for the six months ending December was $15.1 million and TerraCom had $67 million in cash and cash equivalents on hand at the end of the period.
By mid-afternoon trade, shares in Universal Coal were 4.26% higher at $0.245. TerraCom’s shares had slipped 4.69% to $0.32.