Meet BHP’s $5b coal auction’s under-the-radar Japanese kingmakers

afr.com:

Bidders in the $US3.5 billion-plus ($5.2 billion) auction for BHP’s Queensland coal mines – Blackwater and Daunia – are competing to woo five Japanese commodities houses to join their camps.

Sources told Street Talk that the commodities players – some of the biggest names in the sector – are in high demand ahead of binding bids in early August. The sales process is being run by Macquarie Capital.

The Japanese firms being targeted by suitors include steelmakers JFE and Nippon Steel, and trading houses Marubeni and Sojitz. A fifth, Itotchu, is understood to be working with Whitehaven Coal.

Blackwater is one of nine metallurgical coal mines in Queensland’s Bowen Basin. 

Sources said the Japanese players’ popularity among Daunia and Blackwater’s suitors drew from three factors. First, their deep pockets would be much-needed funding support for the winning bidders. The initial bids landed between $US3.5 billion to $US5 billion – that price tag puts the two BHP mines among the biggest M&A plays for most shortlisted parties including Whitehaven, Yancoal Australia, Coronado and BUMA Australia.

Second, the Japanese players know Australian coal well, and the country has been vocal about its reliance on imports. Perhaps most importantly, if a bidder for the two mines succeeds in pinning down a Japanese partner they would have also locked in a buyer for the coal produced by the two mines.

As an example, JFE Steel ticks all three boxes. Its parent, JFE Holdings is capitalised at ¥1.3 trillion ($13 billion) on the Tokyo Stock Exchange, and it already has an offtake agreement to buy coal produced by Blackwater.

It would be interesting to see if the shortlisted bidders succeed in winning over a Japanese bid partner come August, more so