Centennial’s board is supporting the deal and has entered into a bid implementation agreement (BIA) with Banpu.
A year ago Centennial shares were struggling to surpass $3, but two months ago they started to surge after Banpu unexpectedly acquired a 14.9% stake in the Australian thermal coal producer.
Two weeks ago Banpu acquired another 5% of Centennial – putting its total stake at just under the 20% level that attracts Foreign Investment Review Board attention.
Banpu’s takeover offer values Centennial’s market cap at $2.5 billion.
The Thai company plans to fund its move through existing cash reserves and by tapping new and existing credit facilities.
Centennial managing director and chief executive Bob Cameron said Banpu’s offer recognised the profitability of the company and its upside.
“Centennial is strategically placed to take advantage of strong demand for thermal coal, with long-term domestic contracts expiring in coming years,” Centennial managing director and CEO Bob Cameron said.
“We also expect to grow production as a result of our new operations at Airly and the Newstan Lochiel project.”
He also confirmed that Banpu indicated a high regard for Centennial’s personnel and “its intention to maintain current operations and employees”
The BIA sets out various conditions for Banpu’s takeover to proceed and become an unconditional offer.
These include that the Aussie dollar does not exceed US97c in the mean time, and approvals from FIRB, the Bank of Thailand, and 75% Banpu shareholder approval.
Centennial remains permitted to pay a final dividend of up to 4c per share but there is no guarantee such a dividend will be issued.
Banpu aims to dispatch its bidder’s statement to Centennial shareholders in the July-August timeframe while Banpu’s extraordinary general meeting will be held in mid-August.
Centennial is one of the last remaining independent and Australian-owned coal producers.
Banpu Australia was established last year to invest in coal mining and power generation businesses.
The Thai company said this included exploration, obtaining concessions, mining contractor and power plant operations, as well as coal and power trading in Australia.
UPDATE:Centennial shares are up 33% to $5.87 since trading restarted today.
