Golden Energy unit makes 2nd attempt to take over Stanmore Coal

Singapore

MAINBOARD-LISTED Golden Energy and Resources (Gear) is making a second attempt at taking over Australia-listed Stanmore Coal, after its previous offer was rebuffed by shareholders of the coking-coal company.

Golden Investments (Australia) - a joint venture between Gear and Ascend Global Investment Fund - said it is making an unconditional cash offer for all the ordinary shares in Stanmore Coal it does not already own, at A$1 per share, according to a bourse filing on Thursday.

Stanmore Coal explores for, produces and sells metallurgical and thermal coal. Golden Investments is currently the largest shareholder of Stanmore Coal, with voting power of 31.4 per cent.

The maximum cash payable by Golden Investments for the entire deal is A$185.8 million (S$162 million), if it receives acceptances for all Stanmore Coal shares. This calculation assumes the full issuance of performance rights shares and shares under a dividend reinvestment plan.

Gear, which is a thermal coal producer in Indonesia, said it is making the offer to diversify and expand its coal product suite and geographical presence in Australia.

The offer is an on-market one. Petra Capital, appointed as the broker for the takeover attempt, will stand in the market on behalf of Golden Investments and accept up to 50.3 million shares at the offer price starting on April 2 and continuing until the offer period officially starts on April 17. If Golden Investments manages to acquire all the 50.3 million shares, its stake in Stanmore Coal will increase to about 51 per cent.

When the offer period commences on April 17, Petra Capital will continue to purchase Stanmore Coal shares at the offer price until the offer ends on May 18.

The offer price of A$1 represents a 22 per cent premium to Stanmore Coal's closing price of A$0.82 on the Australia bourse on April 1, and a 27.3 per cent premium to the counter's 30-day volume-weighted average price to the same date.

Quiddity Advisors analyst David Blennerhassett told The Business Times on Thursday that while some investors will kick out at the offer price and take any short-term profit, long-term investors will undoubtedly hold on.

Mr Blennerhassett, who also provides insights on online research network Smartkarma, added that there is an intrinsic value to met coal. "You can vary the iron ore composition in the steel manufacturing process, but met coal, as a source of fuel, is a relative constant in the production cycle. Buying met coal companies on a 'rainy day' will more often than not be worth considerably more on a 'sunny day'," he said.

Stanmore Coal's board has recommended that shareholders "take no action" for now, adding that the board will provide a recommendation in due course.

Golden Investments' renewed buyout offer comes more than a year after an unsuccessful attempt to obtain a majority position. A previous offer was made at A$0.95 a share in November 2018, and ended with Golden Investments holding a 25.5 per cent stake as at the offer's close in January 2019. Since then, Gear has been steadily increasing its stake.

In August last year, privately-held Winfield Energy also tabled an offer to acquire Stanmore Coal at an indicative price range of A$1.50 to A$1.70 per share. That offer had valued the company at up to A$435 million, representing a 36.5 per cent premium to the counter's close of A$1.245 on Aug 6, 2019. The Brisbane-based miner subsequently scrapped the proposed takeover, however, citing that it had failed to engage with key shareholders, according to a Reuters report.

Golden Investments said its new offer will allow Stanmore Coal shareholders to realise value for their shares at an "attractive premium in a challenging environment, with an uncertain time horizon for recovery".

It added that Stanmore Coal's share price has been declining since last July as its operational and financial performance continued to deteriorate.

Stanmore's shares have declined 43 per cent from the start of July till April 1. Shares in Gear closed at 18.4 Singapore cents on Thursday, down 1.3 cents or 6.6 per cent.