Media Release 10 April 2007
XSTRATA
COAL ANNOUNCES A$391 MILLION RECOMMENDED OFFER FOR GLOUCESTER COAL
Highlights:
·
Cash offer of A$4.75 per share
·
Premium of 33% to the one month
volume weighted average price of Gloucester Coal shares
·
Unanimously recommended by the
Gloucester Coal Board of Directors
·
Unique synergy potential with
Xstrata Coal’s existing NSW coal operations, enabling Gloucester Coal
shareholders to receive an attractive cash premium in a strong pricing
environment
·
Increases Xstrata’s exposure
to thermal and metallurgical coal and provides access to the Gloucester Basin,
100km east of the Hunter
Valley
·
Consolidates Xstrata’s
position as the world’s largest export thermal coal producer and a
significant producer of coking coal
Xstrata Coal
(“Xstrata”) announces that it has entered into a Merger
Implementation Agreement (the “MIA”) with Gloucester Coal Ltd
(“Gloucester Coal”) for the proposed acquisition of all of the
shares in Gloucester Coal by Xstrata via a Scheme of Arrangement (the
“Scheme”). Under Xstrata’s proposal, Gloucester Coal
shareholders will receive A$4.75 cash per share (the “Offer”),
valuing Gloucester Coal’s fully diluted equity at A$391 million.
The Gloucester Coal Board of Directors has
advised Xstrata that it has formed the view that the Offer is in the interests
of the Gloucester Coal shareholders and unanimously recommends that, in the
absence of a superior proposal, all Gloucester Coal shareholders vote in
favour of the Scheme. Furthermore, the Directors of Gloucester Coal have also advised that,
in the absence of a superior proposal, they intend to vote all shares held or
controlled by them at the time of the Scheme meeting in favour of the Scheme.
Peter Coates, Xstrata
Coal Chief Executive, said, “The Gloucester Coal management team and employees have done an
excellent job in establishing sustainable coal mining operations in the
Gloucester Basin. We look forward to working with the Gloucester Coal team, customers and other stakeholders
to continue this work and to develop the full potential of these operations..
“Gloucester
Coal’s operations further extend the life of Xstrata’s New South Wales mines,
with good potential to add to the resource and reserve base through near-mine
exploration and further resource conversion. Our ability to blend thermal
coal production from Xstrata’s existing Hunter Valley
mines with Gloucester Coal’s thermal coal product, together with the
addition of a high-fluidity coking coal to our portfolio, diversifies our coal
product offering further and presents significant synergy potential. These
unique benefits enable us to make an attractive cash offer to Gloucester Coal
shareholders.”
Andy
Hogendijk, Chairman of Gloucester Coal, said “The Board of Gloucester Coal
welcomes Xstrata’s offer. Xstrata’s offer, during a time of
sustained robust coal prices, confirms the value that Gloucester Coal has
created in recent years by developing a leading Australian coal business.
The Gloucester Coal share price has performed strongly since the refloat of the
business via a book build at 69 cents on 5 April 2004, almost three years ago
to the day. The Board believes the offer recognises the potential future
growth of coal mining operations in the Gloucester Basin
and in the Board’s opinion represents an excellent outcome for the
Gloucester Coal shareholders.
“If
the Scheme is approved by shareholders, the Board and management of Gloucester
Coal will work closely with the company's customers, community and employees to
ensure a smooth transition to ownership by Xstrata.
“The
Board believes that Xstrata Coal’s proven track record of investment in
Australian coal operations to optimise resource potential and mine life,
together with an excellent history of community involvement, health, safety and
environmental management, will benefit our stakeholders.”
The transaction, by way of a Scheme of Arrangement, is
subject to regulatory, Court and Gloucester Coal shareholder approvals,
together with other conditions. An explanatory memorandum setting out the terms
and rationale for the transaction, an independent expert’s opinion and
the reasons for the directors’ recommendation will be circulated to all
Gloucester Coal shareholders in early June 2007. A general meeting
of Gloucester Coal shareholders to approve the Scheme is expected to be held in
early July 2007 with transaction completion anticipated in mid July 2007.
The MIA between
Gloucester Coal and Xstrata contains non-solicit provisions on the part of
Gloucester Coal, subject to customary “fiduciary out”
provisions. Gloucester Coal has agreed to pay Xstrata a break fee of 1%
of the value of the Offer in certain circumstances, as set out in Annexure A.
Key
Terms
|
Price:
|
A$4.75 per share in
cash
|
|
|
Indicative Dates:
|
Gloucester Coal First Court Hearing (convene Scheme
meetings)
|
early June 2007
|
|
|
Mail out of
Explanatory Memorandum
|
early June 2007
|
|
|
Gloucester
Coal Scheme Meeting
|
early July 2007
|
|
|
Second Court Hearing
(approval of Scheme)
|
early July 2007
|
|
|
Expected Date of
Completion
|
mid-July 2007
|
Ends
Notes
to editors
Xstrata Coal is the world’s largest producer of export
thermal coal and a significant producer of coking coal. Headquartered in Sydney, Australia,
Xstrata Coal has interests in 32 operating coal mines in New
South Wales, Queensland, South Africa and Colombia. Xstrata Coal is part of Xstrata plc, a major global
diversified mining company, listed on the London
and Swiss stock exchanges with a market capitalisation of approximately US$50
billion.
Xstrata plc maintains a
meaningful position in seven major international commodity markets: copper,
coking coal, thermal coal, ferrochrome, nickel, vanadium and zinc, with a
smaller aluminium business, recycling facilities, additional exposures to gold,
cobalt, lead and silver and a suite of global technologies, many of which are
industry leaders.
The Group's operations
and projects span 19 countries: Argentina,
Australia, Brazil, Canada,
Chile, Colombia, the Dominican
Republic, Germany,
Jamaica, New
Caledonia, Norway,
Papua New Guinea, Peru, the Philippines,
South Africa, Spain, Tanzania,
the USA and the UK.
Xstrata is headquartered in Zug,
Switzerland,
and employs over 43,000 people including contractors.
Gloucester Coal Ltd is a coal mining company, listed
on the Australian Securities Exchange. Gloucester Coal has two mining
operations, Stratford
and Duralie, both located in the New South Wales Gloucester geological basin.
The company also holds coal exploration licenses A311 and A315 which cover a
large proportion of the basin and include a number of known coal
deposits. In the year ended 30 June 2006 Gloucester Coal produced 1.9mt
of saleable thermal and coking coal and reported a net profit of A$40.4 million.
Gloucester Coal is
focused on the production of both coking and thermal coal products. These
products are produced through the efficient blending of coal from its Stratford, Duralie and
satellite operations. All product coal is transported by rail to Newcastle for export, or to New South Wales power stations.
ANNEXURE
A
SUMMARY
OF MERGER IMPLEMENTATION AGREEMENT TERMS
Gloucester
Coal and Xstrata have entered into a Merger Implementation Agreement (the
“MIA” or the “Agreement”) in relation to a proposed
scheme of arrangement for Xstrata to acquire all the shares in Gloucester Coal
(the “Scheme”). Xstrata is proposing to acquire Gloucester
Coal through a subsidiary, Helios Australia Pty Limited
(“Helios”). If the Scheme is approved by Gloucester
Coal’s shareholders, Xstrata will pay A$4.75 cash for each share in
Gloucester Coal.
The MIA
outlines the obligations of Gloucester Coal and Xstrata in respect of the
Scheme and a copy of the MIA will be included in the Scheme Booklet that will
be mailed to Gloucester Coal shareholders prior to the Scheme meeting.
The key terms of the MIA are set out below.
|
Conditions Precedent to Scheme
|
§
Approvals from all relevant Australian regulatory bodies
such as FIRB, ASIC, ACCC and ASX
§
Gloucester Coal shareholders’ approval of the
Scheme at the Scheme Meeting by the requisite majorities under the
Corporations Act
§
Court approval of the Scheme in accordance with section
411(4)(b) of the Corporations Act
§
The issue of an Independent Expert report which
concludes that the Scheme is in the best interest of Gloucester Coal
shareholders
§
No ‘Gloucester Coal Prescribed Event’ has
occurred as defined in the Agreement
§
No ‘Gloucester Coal Material Adverse Change’
has occurred as defined in the Agreement. Material Adverse Change is
defined by reference to an impact on consolidated net assets Gloucester of at least
A$10 million or an impact on annual net profit after tax of at least A$3
million, subject to certain exclusions
§
The parties representations and warranties under the
Agreement remaining true and correct in all material respects, subject to
materiality thresholds
§
No person (other than Helios or its Associates) acquires
a Relevant Interest in, or becoming the holder of 26% or more of Gloucester
Coal shares
§
All outstanding Gloucester Coal options are
exercised, cancelled or acquired by Helios on or before the First Court Date
§
Completion by 17 April 2007 of a due
diligence investigation of the Gloucester Group by Helios in accordance with
the terms of the Agreement, and such due diligence investigation not
disclosing one or more changes, events, occurrences or matters which have or
are likely to have the effect of:
-
the value of consolidated net assets
of the Gloucester Group being reduced by at least A$10 million; or
-
the ongoing consolidated annual net
profit after tax of the Gloucester Group being reduced by at least A$3
million
|
|
No-talk, no-shop and notification obligations
|
Gloucester
Coal must ensure that during the period from the date of the Agreement to the
earlier of the termination of the Agreement and 30 September 2007:
§
neither it nor any related persons, directly or
indirectly, solicit, invite, facilitate, encourage, or initiate any
enquiries, negotiations or discussions or communicate any intention to do any
of these things with any view to obtaining any offer, proposal or expression
of interest, from any person in relation to any Competing Transaction (no shop obligations);
§
neither it nor any related persons negotiate or enter
into, or participate in any negotiations or discussions with any other person
regarding, a Competing Transaction (no talk
obligations);
§
it promptly informs
Helios if it receives an unsolicited approach with respect to a Competing
Transaction, or any request for information
which it has reasonable grounds to suspect may relate to a Competing
Transaction (Approach);
Subject to
the Directors’ fiduciary and statutory duties, the Board of Gloucester
Coal must not change its recommendation in favour of the Scheme in response
to an Approach unless it first uses reasonable endeavours to provide Helios
with 5 Business Days within which to match the terms of the Approach.
|
|
Limitations to no-talk obligation
|
No-talk
obligations do not apply if Gloucester Coal’s Board of Directors has
determined that:
§
the Competing Transaction is from a person of reputable
commercial standing and could reasonably be expected to become a
superior proposal; and
§
based on legal advice a failure to respond would involve
a breach of fiduciary duties or would otherwise be unlawful.
|
|
Break fee
|
A break
fee of $3.91 million (equivalent to 1% of Gloucester
Coal’s market capitalisation at the offer price) is payable by
Gloucester Coal to Helios if:
§
a person (other than Helios) acquires a Relevant
Interest of at least 50% of Gloucester Coal shares as a result of a takeover
offer or other merger or similar transaction; or
§
a person (other than Helios) directly or indirectly
acquires all or a substantial part of Gloucester Coal’s business
(including by way of sale of assets, sale of shares or joint venture); or
§
a person (other than Helios) acquires control of
Gloucester Coal within the meaning of section 50AA of the Corporations Act or
otherwise acquires or merges with Gloucester Coal; or
§
a person (other than Helios) acquires or merges
(including by a reverse takeover bid or dual listed company structure) with
Gloucester Coal; or
§
at any time before the Scheme Meeting, the Gloucester
Coal Board makes a public statement withdrawing or adversely modifying their
support or recommendation of the Scheme, other than in circumstances where:
-
Gloucester Coal validly terminates, or is entitled to
terminate, the Agreement;
-
where the Scheme has not become effective due to
non-fulfilment of conditions with respect to FIRB or competition approvals;
or
-
an Independent Expert concludes in its report in
relation to the Scheme (including any updates to such report) that the Scheme
is not in the best interest of the Gloucester Coal shareholders; or
§
Gloucester Coal is in material breach of the Agreement
which is not remedied in accordance with the Agreement; or
§
all of the following are satisfied
-
a Gloucester Coal Prescribed Event or a Gloucester Coal
Material Adverse Change occurs prior to 8.00am on the Second Court Date.
-
all of the following apply in relation to the Gloucester
Coal Prescribed Event or the Gloucester Coal Material Adverse Change:
·
the prevention of the Gloucester Coal Prescribed Event
or Gloucester Coal Material Adverse Change was within the control of
Gloucester Coal; and
·
had the Gloucester Coal Prescribed Event or Gloucester
Coal Material Adverse Change occurred prior to the date of the Agreement, the
Gloucester Coal Prescribed Event or Gloucester Coal Material Adverse Change
might reasonably be expected to have resulted in Helios not entering into the
Agreement; and
·
Gloucester Coal has failed to rectify the Gloucester
Coal Prescribed Event or Gloucester Coal Material Adverse Change within 10
Business Days after receipt of notice from Helios requiring Gloucester Coal
to do so.
|
|
Termination Rights
|
The MIA
may be terminated at any time by:
(a)
either party if:
§
at any time prior the Second Court Date there is an
unremedied material breach in respect of the other party;
§
the Scheme has not become Effective on or before the End
Date (other than as a result of a breach by that party of its obligations
under the Agreement);
§
the resolution submitted to the Scheme Meeting is not
approved by the relevant majorities;
§
the independent expert opines that the Scheme is not in
the best interest of Gloucester
shareholders;
§
a court or other regulatory authority has issued a final
and non-appealable order, decree or ruling or taken other action which
permanently restrains or prohibits the Scheme taking effect; or
§
the other party or any of their related bodies corporate
becomes insolvent,
(b) by
Helios if at any time prior to 8.00 am on the Second Court Date all the
Gloucester directors change their recommendation that Gloucester shareholders
vote in favour of the Scheme or otherwise make a public statement indicating
that they no longer support the Scheme, and
(c) by Gloucester if Helios
ceases to be a subsidiary of Xstrata plc
|
ends