Banpu has agreed to buy Australia’s Centennial Coal for US$ 2 billion. The price reflects a 40% premium on the company’s closing price on Friday, this seems like a fairly large premium to pay on a company, but Banpu are expecting excellent growth prospects. Centennial possess reserves of 400 million t, which Banpu can now utilise. Centennial is also expecting to renegotiate its cheap supply agreements with its main customers; power generators in South Australia.
Banpu has been looking to expand into overseas coal production after exhausting local coal reserves.
Banpu already own a 20% share in the company and based on the high premium they are offering, it’s highly unlikely anyone else will come in with a rival bid. The proposed acquisition has led Banpu’s share to rise by 2% and Centennial’s to rise by 33%.
Banpu are planning on financing the takeover bid with existing cash reserves, and under new and existing credit lines.
This takeover is the first since the mining resource tax was proposed by the Australian government, the tax has now been clarified by Julia Gillard after she successfully ousted Kevin Rudd and will stand at 30% for coal. Centennial’s Chief Executive, Bob Cameron, said the end of the mining tax row helped both companies settle on a price, but said there were still issues to be resolved in the new mineral resource tax.
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