World Business

Banpu buys Centennial

By Ben Sharples (China Daily)
Updated: 2010-07-06 11:11

MELBOURNE - Banpu Pcl, Thailand's biggest coal producer, agreed to buy the rest of Centennial Coal Co for A$2 billion ($1.7 billion) in the nation's biggest overseas takeover to secure supplies as prices climb.

Banpu will pay A$6.20 cash a share, 40 percent more than Centennial's closing price on July 2, for the 80 percent of the producer it doesn't own, the Sydney-based company said. Centennial directors recommended the bid.

The deal gives Bangkok-based Banpu control of 10 mines in Australia, the world's largest coal exporter, and power station customers in Japan and Europe. The Australian government's decision last week to cut a planned new tax on mine profits may trigger more takeovers of resource companies.

The compromise has "unleashed some of the deals that were in the pipeline", said Mike Elliott, Sydney-based global mining and metals sector leader for Ernst & Young LLP. "The takeover for Centennial Coal has certainly come about with the removal of some of that uncertainty."

Thermal coal prices may rise to $110 a ton next year, from $98 this year, with demand driven by China and India, according to Deutsche Bank AG.

Centennial surged 32 percent to A$5.83 in Sydney trading for the biggest gain since the shares started trading on Aug 5, 1994. Banpu, which began building its stake in Centennial after the proposed profit tax was announced on May 2, ended the morning session 2.3 percent higher at 616 baht.

"Banpu is excited to have exposure to the Australian coal sector and believes that an acquisition of Centennial would be the initial step in driving further consolidation," Chief Executive Officer Chanin Vongkusolkit said in a separate statement.

Related readings:  Jan-May coal imports jump 114%  Energy chief to smother coal-fired power plants  NDRC orders coal firms to keep prices stable  Coal firms asked to keep coal prices from rising

A total of $39.2 billion has been offered for Australian-based companies in announced deals in 2010, according to data compiled by Bloomberg. Singapore-based Wilmar International Ltd agreed on Monday to pay A$1.75 billion for CSR Ltd's Australian sugar unit.

The bid also boosted shares of rival Australian producers. Whitehaven Coal Ltd gained 5.1 percent to settle at A$4.75, the highest close since June 30. Macarthur Coal Ltd rose 5.2 percent to A$12.75, the highest since June 21. The benchmark S&P/ASX 200 Index dropped 0.4 percent.

Banpu's offer is priced at 11.16 times Centennial's earnings before interest, tax, depreciation and amortization.

That's almost double the 6.77 times EBITDA that Yanzhou Coal Mining Co paid when it won Australian government approval for its A$3.5 billion takeover of Felix Resources Ltd last year.

Bloomberg News