China has entered into the takeover battle for coal company Rocklands Richfield with Meijin Energy Group proposing a $154 million offer, trumping India's Jindal Steel and Power's $144 million offer.
China has entered into the takeover battle for coal company Rocklands Richfield with Meijin Energy Group proposing a $154 million offer, trumping India's Jindal Steel and Power's $144 million offer.
South Perth-based Rocklands said today that Meijin, China's largest commercial coke producer, had submitted a conditional takeover proposal of 52 cents cash for each share.
Jindal is offering 42 cents cash for each Rocklands share.
The announcement is below:
On 22 September 2009, the Directors of Rocklands Richfield Limited (RCI or Company) announced that RCI had entered into a Term Sheet with Jindal Steel & Power Limited (Jindal) setting out the principal terms on which Jindal proposed to acquire 100% of the shares in RCI at $0.42 cash per share (Jindal Proposal).
On 2 November 2009, the Company received a competing conditional takeover proposal from Meijin Energy Group (Meijin), the largest commercial coke producer in China. Meijin proposes to acquire 100% of the shares in RCI at an indicative offer price of $0.52 cash per share (Meijin Proposal).
After careful consideration of the terms of the Meijin Proposal, the Board of RCI has determined that the Meijin Proposal is superior to the Jindal Proposal. The Meijin Proposal would be undertaken either by a scheme of arrangement between RCI and its shareholders or by a takeover bid, and otherwise on terms to be set out in an Implementation Agreement to be agreed and executed by RCI and Meijin.
Further details of the Meijin Proposal are set out below.
Shareholders should note that, at this stage, neither the Jindal Proposal nor the Meijin Proposal are formal offers capable of being submitted to shareholders for their consideration.
Both offers are preliminary proposals only that are subject to (among other conditions) due diligence and formal terms and conditions being agreed and documented in an Implementation Agreement.
Accordingly, this announcement is being made only in the interests of updating shareholders on developments in relation to competing preliminary proposals, either or both of which may or may not develop into formal proposals.
Overview of Meijin Proposal
The principal terms of the Meijin Proposal are as follows:
(RCI's costs to be borne by Meijin) The costs involved in carrying out a scheme of arrangement for the Meijin Proposal (Scheme Costs) will be borne by Meijin. The Scheme Costs will be deposited with RCI's lawyers before Meijin commences due diligence.
(Due Diligence) Meijin will have an exclusive right to conduct due diligence during a 90 day period following RCI's recommendation of the Meijin Proposal, such exclusivity to exclude any third party that has already commenced due diligence prior to the date of the Meijin Proposal.
(Consideration) Meijin will acquire a 100% equity interest in RCI at an indicative price of A$0.52 per share on a fully diluted and unencumbered basis, for an aggregate offer price of A$200 million, plus HK$30 million held as cash by RCI and any other cash given to RCI on the exercise of options.
(Conditions) Meijin will apply for FIRB and other Australian, Chinese and any other statutory or regulatory approvals within 90 days from 2 November 2009 and the Meijin Proposal will be subject to such regulatory approvals being obtained.
(Matching Right) Meijin seeks the right but not the obligation to increase or match any higher bid by a third party. If RCI agrees to give Meijin this right, the RCI Board must not recommend any such higher bid as a superior proposal until Meijin exercises its right in writing within 7 ASX trading days to match, outbid or decline to match or outbid the higher offer.
(Placement) RCI will agree to issue shares to Meijin under a private placement at a price of $0.42 per share, equal to up to 15% of the issued capital of RCI or such lesser number of shares as RCI may issue to Meijin without obtaining shareholder approval (Placement), the Placement to be completed within 45 days of the commencement of due diligence.
(Board Representation) RCI will appoint one nominee of Meijin to the Board of RCI following completion of the Placement (if it proceeds).
(Acceptance condition) The Meijin Proposal is conditional on Meijin acquiring between 19.9% and 90% of issued securities in RCI (the Meijin Proposal being for 100%).
(Business Control) In the event that Meijin acquires between 19.9% and 90% of the securities in RCI, Meijin will be appointed the Contractual Manager and Operator of RCI's Chang Yuan (Huaibei) Chemical's & Coking Co Ltd, and Meijin will help RCI to complete its new coking oven project at its Huaibei coking plant.
(Recommendation) RCI's Directors will unanimously recommend the Meijin Proposal to RCI shareholders, subject to their fiduciary duties to RCI and their duty to maximise shareholder value.
Shareholders should note that the terms of the Meijin Proposal are being considered by RCI together with its legal advisers, and may be subject to amendment by agreement with Meijin, including the terms relating to the Placement and Business Control.
The Meijin Proposal values RCI at A$200 million on a fully diluted basis plus the value of cash held by RCI and any further funds received by RCI from the exercise of RCI convertible securities by existing security holders.
The Meijin Proposal, if it proceeds, would represent:
a 37% premium to the Jindal Proposal as announced on 22 September 2009; and
a 68% premium to RCI's closing share price of $0.31 on 28 August 2009, the date before RCI disclosed that it had received an indicative conditional proposal for a possible takeover of RCI (being the Jindal Proposal).
Update on Jindal Proposal Under the Term Sheet executed by Jindal and RCI and announced by RCI on 22 September 2009, where RCI receives a superior takeover offer during the period for Jindal to conduct due diligence, Jindal will be entitled to revise the Jindal Proposal to match the superior takeover offer.
The Directors of RCI have written to Jindal to notify them of the Meijin Proposal and to invite Jindal to revise the Jindal Proposal to match the Meijin Proposal by 6pm (Perth time) on 4 November 2009. RCI will keep shareholders informed as to whether Jindal submits a revised proposal to match the Jindal Proposal.
Following the announcement of 22 September 2009, Jindal commenced due diligence on RCI and, as announced to ASX on 27 October 2009, Jindal subsequently requested an extension of the period for it to complete due diligence from 31 October to 30 November 2009.
On 2 November 2009, and prior to receipt by RCI of the Meijin Proposal, Jindal and RCI agreed to an extension of the due diligence period for Jindal until 24 November 2009 (by amendment to the Term Sheet), with a view to the parties executing an Implementation Agreement and ancillary documents by 8 December 2009.
Next Steps If Jindal does not submit a revised proposal that matches or is superior to the Meijin Proposal, and the Board of RCI recommends the Meijin Proposal, Meijin will commence due diligence investigations in relation to RCI and Jindal will cease to conduct due diligence. Subject to Meijin being satisfied with the outcome of those investigations and to binding agreements for the Meijin Proposal being entered into, an ASX announcement will be made to that effect
It is intended that an Implementation Agreement and other transaction documents will be negotiated, with a view to the parties executing those agreements within 9 ASX trading days following the completion of due diligence by Meijin.
Shareholders should note that there is no assurance that Meijin will be satisfied with the outcome of its due diligence investigations nor that RCI and Meijin will reach agreement on the transaction documents required to give effect to the Meijin Proposal.
RCI will keep shareholders informed of all material developments with respect to these matters, including a timetable for the Meijin Proposal if the Implementation Agreement is signed. Similarly, RCI will keep shareholders informed of all material developments with respect to the previously announced Jindal Proposal.
About Meijin
Meijin has provided the following description of its operations to RCI: Meijin Energy Group was founded in 1981. The Group is one of the biggest coke producers in China and also the biggest commercial coke producer and supplier in China. Meijin has coking coal resources of over 2 billion tonnes in their ten coal mines. In the next 5 years, Meijin's coke production can reach 20 million tonnes per annum. Meijin is building a 1.8 MkW power station and a 2 Mtpa steel mill.
Meijin became one of the "Top 500 Enterprises" in China in 2008. Meijin Energy Group has more than 10,000 staff including 3,000 professional staff. The Group passed the ISO 9001 quality control system and the ISO 14001 international environmental control system. Production capacity:
7.4 million tonnes of fine washing coal per annum;
5.3 million tonnes of coke production per annum;
150,000 tonnes of coal tar production per annum;
50,000 tonnes of raw benzene production per annum;
50,000 tonnes of ammonium sulphate production per annum; and
2 million cubic metres of coal gas per day or, say, 730 million cubic metres per annum to supply Taiyuan City.
