Canadian Manufacturing

Grande Cache Coal Corp. gets $1B takeover bid

Grande Cache Coal Corp. has signed a deal to be bought by a partnership formed by Chinese and Japanese companies for $1 billion in cash.

CALGARY—Grande Cache Coal Corp. has signed a deal to be bought by a partnership formed by Chinese and Japanese companies for $1 billion in cash.

The Calgary-based coal miner said that Winsway Coking Coal Holdings Ltd., listed on the Hong Kong Exchange, has paired with Japanese trading house Marubeni Corp. for the bid.

The friendly deal is part of a broader trend of Chinese companies acquiring resources around the world and in Canada, where they have bought major mining, oilsands, natural gas and potash assets in the last two years.

Grande Cache is a producer of metallurgical coal for the steel industry and holds coal leases covering more than 22,000 hectares in the Smoky River coalfield in west-central Alberta.

The Asian buyers see the Calgary company as a major supplier of coal to fire the blast furnaces in their steel mills in the coming years.

Demand for steel in China is soaring because of the country’s major infrastructure investments in roads, highways, bridges, factories and office buildings.

As well, soaring Chinese demand for electricity is diverting that country’s coal supplies towards power production.

China Investment Corp. already owns 20 per cent of Vancouver-based Teck Resources, Canada’s largest producer of metallurgical coal.

Monday’s offer, made through a numbered company based in Alberta, is valued at $10 per common share, a 70 per cent premium over the closing price of Grande Cache’s shares on the trading session before the offer was announced, but shares quickly jumped 67 per cent to $9.79 this morning.

Grande Cache said it will not to solicit a another offer and will give the Asian partnership an opportunity to match any competing bids. The agreement also includes a $100 million break fee, plus $10 million in costs payable to Grande Cache if the deal fails under certain circumstances.

“We believe the arrangement is a compelling transaction for Grande Cache Coal’s shareholders and recognizes our highly attractive mining operation and the exceptional team,” president and CEO Robert Stan said in a release.

“In addition, Marubeni has had a long standing business relationship with the corporation and has a 40-year history with the corporation’s mine. Furthermore, Winsway is one of our main customers for the Chinese market.”

The offer will require approval from shareholders and regulators.

This year, Chinese companies have acquired a minority stake in the Syncrude oilsands project and a stake in potash properties in Saskatchewan,

The Grande Cache deal announced Monday includes a break fee of $50 million, plus $10 million in costs, payable by the company if the deal does not go through under certain circumstances.

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