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Aditya Birla, JSW Dominate Bandanna Bid Shortlist

24 May, 2011

Aditya Birla, JSW Steel and Jindal Steel & Power are among firms shortlisted to bid for Australian coal explorer Bandanna Energy in a potential billion-dollar-plus sale, sources said.

A number of Chinese firms were also in the race, the sources familiar with the deal told Reuters.

One source said China’s CITIC Resources Holdings and a subsidiary of China Coal had made it to the second round of the sale process.

Peabody Energy, Xstrata and Wesfarmers also expressed interest, but it was unclear whether their bids had advanced, the source said.

Another source said the process was expected to be completed by the end of June.

Spokesmen for Bandanna and Wesfarmers declined to comment. JSW said it did not comment on speculation, while a spokeswoman for Mumbai-based Aditya Birla declined comment. Officials at Jindal Steel were unavailable for comment.

Bandanna, which holds coal exploration permits in the Bowen and Galilee basins in Queensland, Australia, last year appointed UBS to advise on a strategic review of its funding requirements. It said this could involve the partial or total sale of its assets.

Indian steel, power and coal firms have been scouting for coal assets overseas to supply power plants at home, looking to benefit from the energy-hungry nation’s aim to halve its near-14 percent peak-hour power deficit within two years.

Australia’s Linc Energy last year agreed to sell its Galilee coal project to Adani Enterprises in a cash and royalty deal worth $2.7 billion, marking the largest single mine investment by an Indian firm in Australia.

Aditya Birla, which sources said is working with Standard Chartered on financing a bid, recently missed out on securing a bid for Whitehaven Coal. Its effort to sell the company failed in part due to the strong Aussie dollar.

Bandanna could fetch between A$800 million and A$1.5 billion ($853 million-$1.6 billion), say analysts and media reports.

“Indian firms have the cash for big-ticket acquisitions but valuations would be key,” said K.K. Mital, head of portfolio management at Globe Capital in New Delhi.

Shares in Bandanna rose 3.6 percent on Monday to A$2.03. JSW Steel dropped 2.2 percent to 899.10 rupees and Jindal Steel fell 2.3 percent to 626.05 rupees in a Mumbai market that ended 1.8 percent lower.

SUPPLY SHORTAGE

The Australian Financial Review said in an unsourced report on Monday indicative bids of less than A$1 billion did not make it to the second round, and that India’s NTPC was in the mix.

India holds 10 percent of the world’s coal reserves but local supplies are falling short of demand as the country builds more power plants, and as domestic coal projects run into environmental and land acquisition delays.

The country is likely to import 135 million tonnes of coal in the financial year that began on April 1.

Aditya Birla Group, a telecoms-to-cement conglomerate, has thermal coal requirements for group companies Hindalco, India’s top aluminium producer, and UltraTech Cement, the country’s largest cement producer.

The group is led by Kumar Mangalam Birla, ranked by Forbes as India’s seventh-richest man with a net worth of $9.2 billion.

JSW Steel, which the market values at $4.6 billion, is India’s No. 3 steelmaker. Japan’s JFE Holdings, the world’s No. 5 steelmaker, holds a shade under 15 percent in the company.

Jindal Steel & Power is part of the more-than $12 billion O.P. Jindal Group, and is one of the major steelmakers in the country with interests in mining, power generation and infrastructure as well.

 


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Aditya Birla, JSW Dominate Bandanna Bid Shortlist

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