Gujarat NRE aims to fend off takeover bid

Gujarat NRE plans to reject a $221 million takeover bid for its Australian business based in the Illawarra.

The company has also asked its shareholders to take ‘‘no action’’ on the bid by Indian company Jindal Steel and Power (JSPL) until they have taken a look at a target statement which Gujarat NRE  will release on Monday.

Late last month JSPL, which already has a 19.48per cent stake in Gujarat NRE Coking Coal, made a $221.61million offer to buy out the Australian subsidiary of Kolkata-based Gujarat NRE Coke.

JSPL, which plans to acquire shares through its subsidiary Jindal Steel and Power (Australia) Pty Ltd, has claimed it is not a hostile turnover and that it will not be increasing the offer price of 20¢ a share.

According to ASX regulations, the company must go to the public to raise its stake to more than 20 per cent and its offer will commence on February 15 and remain open until March 15.

In a filing to the Australian Securities Exchange (ASX), Gujarat NRE Coking Coal said it did not intend to accept the offer.

"The company has been advised that the Gujarat NRE group companies, being the major shareholders holding approximately 64 per cent of the issued capital in the company, do not intend to accept the offer," Gujarat NRE Coking Coal stated.

According to the filing, the soon-to-be-released target statement will make a formal recommendation to shareholders about the offer.

"The Board of Directors of the company will continue to keep shareholders informed of developments as they occur," the letter said.

However, UBS global commodity analyst Daniel Morgan said a takeover of the company could be good news for its employees, and the wider Illawarra community.

"It would mean more capital to fully develop the mines - Jindal would have a bigger balance sheet which would facilitate the expansion of the mines to more fully realise their potential, on a bigger scale than would have been archived under a stand-alone enterprise," he said.

"Gujarat has gotten into quite a bit of debt to develop their Illawarra mines, and so far development of the mines is behind schedule and over budget and that comes with pressures.

"Jindal has in the past assisted them with financing as a shareholder so the company is not an unknown quantity.

"If someone like Jindal with substance and bigger pockets sees a future in the organisation and wants to invest in it, that can only be good for the employees and the broader community."

Gujarat's announcement of its intention to reject the offer could mean one of two things, Mr Morgan said.

"What we often see in situations like this is the owners of the company have a view of the company's value, and they don't find the value placed upon it by another company as acceptable," he said.

Gujarat NRE Coking Coal executive chairman Arun Jagatramka.

Gujarat NRE Coking Coal executive chairman Arun Jagatramka.

"Major shareholders either believe they can add more value than what's being offered and that eventually that value will be realised.

Gujarat NRE Coking Coal executive chairman Arun Jagatramka was in India and could not be contacted for comment yesterday.