The board of directors of South African junior miner Coal of Africa Limited (CoAL) have recommended that an offer be made to acquire Universal Coal for A$126.4 million (US$91 million), providing the company with immediate coal production and cash flow.
CoAL said in a statement Thursday the offer was compelling for both companies, as the acquisition would "create a balanced and focused South African miner," providing CoAL with "a diversified portfolio of production, development and exploration projects with expected synergies to the existing CoAL business."
Universal has been facing an unsolicited bid from Frankfurt-based IchorCoal to acquire the shares in the miner it does not already own. The company already holds a 29.99% share in Universal, with its initial investment made last October. At the beginning of November, it offered to pay A$0.25/share, a 56.25% increase on its previous offer in August of A$0.16/share.
CoAL is offering to pay eligible Universal shareholders A$0.20 in cash for each share held and one new CoAL share, or a non-converting loan note with a principal amount of A$0.25/loan note.
Restricted Universal shareholders will also be entitled to receive $A0.25/share in cash or a non-converting loan note with a principal amount of A$0.25/loan note, but will not be able to participate in the cash and share offer.
Independent directors for Universal Coal have agreed to the offer, saying they intend to recommend that the Universal shareholders accept it, as they themselves will sell their shares -- comprising 3.25% of Universal's total issued share capital.
CoAL said it had already received signed statements of intent to accept the offer from Universal shareholders for 40.1% of the total 505.65 million shares currently in issue.
It added that the offer was conditional on gaining approval for the acquisition from the majority of CoAL shareholders at a general meeting. Once approval is received, CoAL must apply for re-admission of its shares to trading on AIM.
The acquisition also requires approval from the South African competition authorities.
CoAL added that once it reaches the appropriate threshold shareholding, it plans to remove Universal from the official list of the Australian Stock Exchange, although it also aims to retain key Universal personnel, using the services of the current Universal executive management team.
Universal Coal produced 2.36 million mt of run-of-mine coal in its 2014-15 financial year which ended June 30.
