UBS issued note on Whitehaven, BHP deal hours before becoming ‘restricted’
UBS published a detailed research report on Whitehaven Coal’s mooted purchase of two major BHP coal mines only hours before the investment bank’s analysts were restricted from discussing the transaction.
Whitehaven, one of the country’s largest thermal coal producers, is considering acquiring the two mines, Blackwater and Daunia, in a transaction that could cost up to $5 billion. It is being advised by Bank of America and UBS. The latter’s involvement was first reported in July.
The UBS offices in Sydney. The investment bank has been assisting Whitehaven with its interest in the two BHP coal mines. Louie Douvis
Whitehaven, in response to a report in The Australian Financial Review, confirmed on September 18 that it was “participating in the sale process” for the two mines as it considered growth opportunities in coking coal. It had been in the auction since the first half of this year.
Three days before the confirmation, UBS analysts published a lengthy note to clients discussing the value of Blackwater and Daunia. They concluded that Blackwater was worth $US2.5 billion ($4 billion), that it could sustain production for “far longer” than five decades and there was “upside for a buyer in cost-out from a leaner operating model” compared to BHP. Daunia, the analysts estimated, was valued at about $US800 million.
On September 19, just four days later, the investment bank’s analysts published a second note discussing the impact the purchase of Blackwater and Daunia would have on Whitehaven. It would lift Whitehaven’s revenue share from coking coal – used almost exclusively in steel making – from less than 20 per cent to about 60 per cent, they wrote.
“Our analysis indicates [Whitehaven] has an array of options available to
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