Australia | Jul 07 2006
By Rudi Filapek-Vandyck
Is the main news regarding Excel Coal (EXL) the fact that management used the takeover offer by US based Peabody Energy Corp to compensate for an unexpected and sharp profit warning, or the fact that the offer consists of a so-called scheme of arrangement?
Given the general view among securities analysts that the offer on the table is not overly generous for Excel shareholders, the scheme of arrangement is almost guaranteed to spark controversy. Excel management owns 47% of all outstanding shares and the scheme of arrangement requires the motion be passed by over 50% of shareholders voting and, 75% of the total votes cast at the meeting.
Nevertheless, at least one broker (Citigroup) believes Excel could turn into another Portman (PMM) as minority shareholders are expected to find the offer too low and some may simply refuse to hand in their shares.
All experts who took the effort to publish a response to the bid this morning, and that is sadly very few, are of the opinion that a competing bid is not likely, though not impossible.
ABN Amro believes Peabody’s offer, supported by Excel management, is one of truly impeccable timing as FY08 should see significantly higher earnings (the broker currently estimates a near doubling of FY07’s profit).
Over at GSJB Were, our sources tell us, the analysts have decided to zoom in on the profit warning by Excel. The broker believes this is worrisome and likely to impact on expectations towards other coal stocks.
GSJBW advises investors should sell the sector in what is seen as a trade-off between M&A speculation and lower earnings forecasts.