WESCOAL Holdings is to bid shares and cash worth R525.6m for Keaton Energy in its effort to establish itself as an eight million tonne a year domestic and export coal miner.
The company today unveiled terms of a takeover offer in which it will offer Keaton shareholders R1.80 per share, equal to a 33% premium to Keaton’s volume weighted average price over the last 30 days.
The offer has the support of 77% of Keaton Energy’s shareholders including the Pouroulis family, who own 26.4% of the company and trading group Gunvor through its investment vehicle Plusbay (26.8%).
Crucially, however, shareholder support is conditional on Keaton not receiving a higher offer, said Mandi Glad, CEO of Keaton in an e-mail. The company said in a cautionary announcement last year that it had received more than one offer.
Coal of Africa CEO, David Brown, said in a statement earlier this week that his company remained focused on adding cash generating assets to its portfolio of mines in development.
The Wescoal offer consists of R1.20 per share in cash, equal to a total of about R350m, with the balance in some 87.6 million Wescoal shares in a ratio of 0.3 for every Keaton share.
Wescoal said its bid, which it hopes to conclude in the first half of its 2018 financial year, would be funded through a combination of cash, debt and through the R178m it received from its December empowerment transaction.
“The move should not come as a surprise to anyone as we signalled our intentions to our shareholders last year, particularly in our half-year results,” said Waheed Sulaiman, CEO of Wescoal in a statement.
The offer has a number of conditions including the sale of Keaton’s non-core Vaalkrantz anthracite mine which is held in subsidiary, Leeuw Mining. Interestingly, Keaton is waiting for a change of control permit from the Department of Mineral Resources – a process that has taken the best part of 12 months, and counting.
Wescoal said that it had recently concluded coal sales agreements with Eskom equal to some 7.8 mtpa over the life of the five-year coal sales agreement (CSA) and exports over one million tonnes a year for three years.
This production would be supplied from the firm’s Elandspruit and Intibane operations to which it would add 500,000 tonnes a year from a small underground operation and some 1.2mtpa from Khanyisa, a mine Wescoal has had to idle whilst it waited for a water use licence which is to be issued imminently.
On a back-of-the-matchbox basis, this is production of about 4.2mtpa which, when added to Keaton Energy’s existing production, and output from its Moabsvelden project, once it was commissioned, would see a a combined company production of close to eight million tonnes a year.
