Coal junior Northern Energy has rejected an “opportunistic” $193 million takeover bid from New Hope Coal.
The company’s board unanimously rejected the unsolicited offer, saying it materially undervalued its projects and growth potential.
In a statement, the board said the offer was highly opportunistic and had been timed to take advantage of a short-term share price weakness associated with the Minerals Resource Rent Tax (MRRT) and delays in mine approvals.
“The board considers this offer inadequate,” the company’s chairman Dr Chris Rawlings said.
“This offer has come as the company is on track to begin coking coal production at Maryborough in 2012.
“We are also currently testing several expansion options at Maryborough and we will provide the market with these updates in due course.”
The board noted that the undeveloped Maryborough and Elimatta projects were high-quality growth assets with significant further value and said the company was well positioned for continued growth.
The board also said the new offer provided no improvement in value to the initial proposal rejected on 8 October.
However, New Hope chairman Robert Millner said the bid offered higher premiums than most takeovers, The Australian reports.
He said Northern Energy would need to spend more than $660 million to develop both the Maryborough and Elimatta projects.
"If our offer wasn’t there, the share price would be back to $1 or lower,” he said.
“We have got the expertise to develop the mine and we’ve got the cash to develop the mine.
"It is a very, very good premium."
New Hope has around $2 billion in cash and is looking for acquisitions, as evidenced in its unsuccessful bid for Macarthur Coal earlier this year.
The Northern Energy board is advising its shareholders to take no action in relation to the bid.