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Coal of Africa agrees takeover of Universal Coal

Published: 10:21 26 Nov 2015 GMT

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Universal Coal owns 70.5% and operates the Kangala Colliery

Shares in Coal of Africa (LON:CZA) rose around 10% after its unveiled a deal to take over South Africa-focused miner Universal Coal (ASX:UNV).

It has agreed to pay the equivalent of A$126.4mln (US$91mln), paid in cash and Coal of Africa shares.

Universal Coal shareholders will receive A$0.25 - either entirely in cash or A$0.20 plus one Coal of Africa share per Universal Coal share. Alternatively, certain shareholder can opt to receive a non-converting loan note, which will carry interest at 12.68% and can be redeemed between 12 and 18 months from issue.

The AIM-quoted company said the deal gives shareholders immediate exposure to coal production and cash flow, as well as a portfolio of development and exploration assets.

Directors and major shareholders (representing 40.1%) of Universal Coal have backed the proposed transaction.

Universal chief executive Tony Weber, described it as a “compelling offer” and highlighted that it would immediately crystallise value for our shareholders, but also allows them to retain exposure to the new group.

“Looking ahead we see exciting times for the merged group,” Weber said.

David Brown, Coal of Africa chief executive, meanwhile, called the deal “a springboard” to further consolidation.

"The combination of Universal's producing assets and CoAL's development portfolio, coupled with the excellent shareholder support ensures that the merger, as a first of its kind in the South African coal industry, will not be the last, we see the enlarged group as a springboard to creating a new coal mining force," he said.

Coal of Africa said the acquisition will be paid for from existing cash resources and a US$15mln equity investment from Singapore-based Yishun Brightrise.

Universal Coal owns 70.5% of the Kangala Colliery, which it operates, as well as a 49% stake in in the New Clydesdale Colliery. The company is separately recommending its shareholders reject a rival, unsolicited A$0.16 per share offer from Ichor Coal.

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