CoAL’s offer to take over Universal Coal lapses

JOHANNESBURG (miningweekly.com) – Triple-listed Coal of Africa Limited’s (CoAL’s) offer to acquire the entire share capital of Universal Coal has lapsed, with all contracts resulting from acceptances of the offer by Universal shareholders now void.

CoAL in December formally launched an offer to take over the South Africa-focused coal miner, which valued Universal at about A$126.4-million, competing with IchorCoal.

CoAL CEO David Brown said at the time that merging of Universal and CoAL would be a springboard to creating a “new coal mining force”, and that the acquisition of Universal would provide CoAL with immediate production and cash flow, as well as a diversified portfolio of production, development and exploration projects.

The offer even received approval from the South African Competition Commission. However, at the offer’s scheduled close, on July 15, CoAL had only received acceptances representing about 95.72% of Universal’s issued share capital and, as a result of the lapse, CoAL now has no voting power in Universal.

Moreover, while an overwhelming majority of Universal shareholders accepted CoAL’s offer, comprising 20c in cash and one of its own shares or, subject to eligibility under applicable securities laws, a nonconverting secured loan note worth 25c for each share held in Universal, the coal supply agreement with Eskom at the New Clydesdale colliery (NCC) had not yet been finalised or signed.

Universal had, therefore, not yet started with mining activities at NCC, at which first coal was expected to be produced in the first half of 2016.

As a result of the continued uncertainty in finalising the coal sales agreement and the other working capital funding opportunities, CoAL's directors were not able to comment on the required working capital statement regarding the readmission of the consideration shares and CoAL's shares to trading on Aim.

“While we are disappointed that we cannot complete the offer at this time, it is important that any acquisitions be sustainable and accretive; we will continue to evaluate all opportunities, which include making another offer for Universal, the structure of which would need to ensure the sustainability of the enlarged group going forward and be capable of completion,” the company said in a statement on Friday.

Notwithstanding the opportunities being evaluated, CoAL would continue to focus on restructuring its balance sheet, operations and project pipeline to be better positioned to unlock shareholder value, as has been evidenced by the Soutpansberg deferred consideration agreement and continued regulatory progress on both the Vele colliery and the Makhado project.

Surprisingly, CoAL’s share price had only been affected by 1.35%, falling from its close of 74c a share on Thursday, to 73c a share on Friday.