The Asset
January 2010

In one of the few hostile takeovers of an Australian-listed company by an Asian firm, Hong Kong-based Noble Group in June 2009 snatched Australian coal firm Gloucester Coal from another Australian player Whitehaven Coal, scuttling the planned merger between the latter two. This is only the second hostile takeover by an Asian company of an Australian firm after China’s Sinosteel acquired Midwest Corporation for US$1.5 billion in July 2008.

On February 20 2009, Gloucester and Whitehaven announced a possible merger in which Whitehaven’s share-holders were offered one Gloucester share for every 2.45 Whitehaven shares. This implied an offer price of A$3.65 (US$3.32) for each Gloucester share. The merged entity would have been a leading Australian-listed coal company with a market capitalization of approximately A$900 million.

Subsequent to that, Noble Group, which was the largest shareholder in Gloucester at that time with a stake of 21%, announced its own competing bid for Gloucester as it faced a dilution from 21% to 7% in the merged entity.

On February 27, a week after the Whitehaven-Gloucester bid, Noble made an off-market all-cash takeover offer to acquire all of Gloucester shares at A$4.85 per share on conditions that Whitehaven merger does not proceed. The offer price represented a 54% premium to the pre-Whitehaven merger proposal price for Gloucester. Noble received a no objections note from the Foreign Investment Review Board, the Australian regulator, to acquire 100% of Gloucester in terms of Australian foreign investment policy.

Noble then filed its application with the Australian Government’s Takeovers Panel for declaration of unacceptable circumstances for the proposed Gloucester-Whitehaven bid, arguing that the proposed merger involved a change in control of Gloucester, and so it should be subject to approval of Gloucester shareholders. The panel on March 18 initially announced its decision of unacceptable circumstances and concluded that Gloucester shareholders should be granted a vote to determine if the merger or Noble’s takeover offer is superior.

Gloucester and Whitehaven then sought a review of the initial panel decision. The panel on April 4 decided to revoke its previous order about the need for a shareholders vote. It ordered the Gloucester-Whitehaven merger to be made subject to the conditions that Gloucester board could terminate the merger if it deemed there was a superior proposal condition.

Noble revised its A$4.85 all cash offer to A$6 per share on May 5. Gloucester on May 12 appointed an independent expert to determine the merits of the relative bids. Subsequently, Noble further increased its cash offer to A$7. Gloucester board announced the revised offer was superior to the Whitehaven merger and unanimously recommended the Noble offer to shareholders.

Noble acquired a total of 88% of Gloucester Coal through-out the offer period, which closed on June 16.