Yesterday morning, Universal Coal (UNV.ASX) announced receipt of an indicative, non-binding acquisition proposal at $0.35 per share from Ata Resources Pty Ltd. Given the conditional non-binding nature of the bid, it is not quite yet the asymmetric arbitrage opportunity that we would normally trade with conviction. Somewhat fortunately for us (and a very rare exception indeed), UNV was already an existing position within the portfolio as this is the second time the junior coal minor has been subject to M&A activity in recent years.
Back in 2015, Universal had successfully brought the Kangala Colliery online and was in process of bringing the New Clydesdale Colliery (NCC) into production when a takeover approach by current major holder Ichor Coal was announced at an offer price of $0.16 per share. This was quickly followed by further proposals from counterbidders at $0.20 before a $0.25 per share bid from fellow South African junior Coal of Africa (CZA) got the nod of approval from the board of directors. The $0.25 per share bid valued the company at A$126.4m, or a 5.5 x Attributable EV/EBITDA (FY15) based on a Kangala operation at steady state. This is before the second operation, NCC, came online.