Following initial bid delays, IchorCoal on Wednesday provided its offer document in relation to its cash offer for the entire issued and to be issued share capital of ASX-listed South African coal miner Universal Coal.
On 21 August 2015, major shareholder IchorCoal announced its intention to make an offer to acquire the company at A$0.16 a share, valuing Universal Coal’s entire issued ordinary share capital at approximately A$80.9 million – an offer viewed by Universal Coal as “inadequate” and “opportunistic”.
IchorCoal believes in the long-term fundamentals of the South African thermal coal market and anticipates a recovery in the global seaborne market in the medium to long term.
In the context of challenging market conditions IchorCoal also believes that the consolidation of its interests in Universal Coal with its existing South African coal mining interests provides the most robust platform to manage the uncertainty in the prevailing and forecast market conditions.
In the offer document, IchorCoal, currently a 29.99% shareholder in Universal Coal, said that it believes its offer price of A$0.16 per share is an attractive proposition that represents a significant premium of 46.5% over the 60-day volume-weighted average price on the ASX of A$0.109 per share on 20 August 2015 – the last business day prior to the firm intention announcement – and a premium of 45.5% to the closing price of A$0.11 per share on that day.
Meanwhile, IchorCoal also believes that its cash offer provides Universal Coal shareholders an opportunity to realise their investment at an attractive premium in a highly-illiquid share, which has not paid a dividend since its listing on the ASX in 2010.
While a formal recommendation from the Universal Coal board has not been sought, the company had formed a subcommittee to assess the offer. It subsequently advised it shareholders to take no action, concluding that the offer is inadequate, highly conditional and opportunistic.
After careful consideration, the sub-committee was unanimous in finding that Ichor’s proposed offer does not reflect the inherent value of Universal, besides lacking certainty of completion.
The closing date of this offer is on 3 December 2015.