Daewoo International Corp., the trading company controlled by Posco, and Korea Resources Corp. made an initial bid for Whitehaven Coal Ltd., an Australian producer with a market value of A$3.6 billion ($3.6 billion).
State-run Korea Resources is leading the bid, Kim Beom-suk, a spokesman for Daewoo International said Monday by phone. The offer was confirmed by Kang Shin Young, a spokesman for Seoul- based Korea Resources. Whitehaven, which offered itself for sale in October, short-listed potential buyers this month.
Demand for coal from steel and power producers has spurred mining companies to seek assets worldwide, with deals worth $38 billion announced in the past year. Whitehaven, which produces both energy and steelmaking coal, may be looking for offers greater than A$3.7 billion, UBS AG said in a report last month.
“Everyone wants a slice of the coal market,” Lucinda Chan, division director and head of Asian business at Macquarie Private Wealth in Sydney said by phone. “Commodity prices are expected to be strong, so there’s a lot of interest as coal is a highly used commodity.”
Whitehaven rose 2 percent to A$7.24 at the 4:10 p.m. close of trade in Sydney, the highest since June 1, 2007. It has climbed 13 percent since opening its books to potential bidders on Oct. 29.
Whitehaven won’t comment on which parties have made bids, Managing Director Tony Haggarty said by phone.
Overseas companies have targeted coal producers in Australia, the world’s biggest exporter of the fuel, with Citigroup Inc. saying in a Feb. 11 note that Asian utilities may have to pay record prices for the fuel after flooding disrupted output.
Australia ranks second behind the U.S. as a target for coal takeovers in the past year with deals worth $8 billion announced compared with $12.5 billion in the U.S., according to data compiled by Bloomberg. In the most expensive deal in the industry’s history, Alpha Natural Resources Inc. agreed Jan. 29 to buy Massey Energy Co. for $7.1 billion in cash and stock.
Whitehaven’s board is likely to be “looking for a price north of” A$7.50 a share, a group of analysts at UBS, led by Glyn Lawcock, said in a Jan. 31 note, equating to a 17 percent premium to Whitehaven’s last closing price before announcing the official sales process.
Whitehaven is developing the Narrabri mine in Australia’s New South Wales state, where first-phase shipments began in July. It also owns 11 percent of Newcastle Coal Infrastructure Group, a port development that commissioned 30 million metric tons of export shipping capacity last March. A further 23 million tons is due to become available in mid-2012.
Korea Resources and Daewoo already own a 7.5 percent stake of Whitehaven’s Narrabri operations. POSCO, Korea’s largest steelmaker, owns 67.91 percent of Daewoo International, according to data compiled by Bloomberg.
The price for thermal coal at the port of Newcastle in New South Wales, the benchmark for Asia, rose to $138.50 a metric ton in the week ended Jan. 14, the highest since September 2008, according to IHS McCloskey, a Petersfield, U.K.-based provider of data. It was at $126.75 in the week ended Feb. 4.
While prices of the fuel for immediate delivery “have eased back” after increasing to a two-year high last month, “The focus will be on the longer-term outlook,” Citigroup said in a Feb. 11 note. “We still see strong demand growth and expect contract prices to be settled at record highs.”
Coal producers are being forced to spend more on acquisitions to secure reserves in nations from Australia to Mozambique as consumption in China and the developing world drives up prices.
A record $30 billion in deals may be completed in the industry this year as acquirers pay an average 33 percent premium, the highest in at least a decade and double the historical average, according to Bloomberg data.