Coal Of Africa agrees Universal takeover terms

Coal of Africa Limited (COAL) has agreed terms for a recommended cash and shares offer of Universal Coal, which will value the Australian-listed target at AUD 126.4m (£60.5m).

Following an indicative offer on 2 November, AIM-listed COAL will pay 20 Australian cents in cash and one new COAL share for each Universal share, or a non-converting, secured loan note with a principal amount of A$0.25 per loan note.

The cash component alone values the Universal shares at 60% more than they traded in the year preceding news of the offer.

The deal will be structured as a reverse takeover under AIM rules and will require shareholders in both companies to vote in favour, though COAL has received signed statements of intent to accept the offer from Universal shareholders owning more than 40% of the company, all of whom have agreed to elect for the loan note alternative in respect of their entire holding of Universal shares.

The notes will have a maximum 18-month term and carry interest at a rate of 12.68% per year for the first 12 months from issue, and 15% for the remainder of the term, redeemable by the holder on the first anniversary of the date of issue or at the end of the term.

“The acquisition of Universal will provide Coal of Africa with immediate coal production and cash flow as well as a diversified portfolio of production, development and exploration projects with expected synergies to the existing Coal of Africa business,” COAL said in a statement on Thursday.

Analysts at Investec said it looked a good outcome for Universal shareholders and COAL "will become a company that has coal production and cash flows to support its portfolio of development assets".

Shares in COAL were up 15% to 2.88p by 1010 GMT on Thursday.