Australian coal miners Aston Resources Ltd. (AZT.AX) and Whitehaven Coal Ltd. (WHC.AX) announced Monday they have agreed to merge in an arrangement under which Aston shareholders will receive 1.89 Whitehaven shares for each Aston share they hold. The scheme of arrangement is expected to be implemented in April 2012.
Whitehaven has also entered into separate agreements to acquire all of the shares and other issued securities in unlisted coal explorer Boardwalk Resources. Boardwalk Resources investors, including Tinkler Group and Farallon Funds, will be issued 85.88 million Whitehaven shares as consideration for the acquisition.
The merger of Whitehaven and Aston, together with the acquisition of Boardwalk, would result in formation of the largest ASX listed independent coal company, with a pro forma market capitalization of approximately A$5.1 billion, the companies noted.
Boardwalk Resources shareholders will receive an additional 34.02 million Whitehaven shares upon receipt of mining leases and environmental approvals at any two of Dingo, Ferndale, Sienna, Monto and Oaklands North projects, being 17.01 million shares for each approval.
As part of the deal, existing Boardwalk Resources shareholders will contribute $150 million in cash to Boardwalk Resources, which will be used for the ongoing development of its assets. Boardwalk has existing debt of $50 million.
The Aston directors do not have an interest in the Boardwalk deal, but have considered the merger and unanimously recommend its shareholders vote in favor of the transaction in the absence of a superior proposal.
Aston's largest shareholder, Tinkler Group, representing about 32 percent of Aston's total issued shares, has decided to vote in favor of the merger in the absence of a superior proposal.
As per the Scheme of Arrangement, Whitehaven will pay a fully franked special dividend of A$0.50 per share to its shareholders immediately prior to implementation of the merger. Aston and Boardwalk shareholders will not be eligible for the Whitehaven Special Dividend.
Following the merger, the board of the combined company will comprise the Hon. Mark Vaile as Chairman, John Conde AO as Deputy Chairman and Tony Haggarty as Managing Director.
Allan will be the Executive Director and Peter Kane, interim CEO of Aston, will form part of the senior management team.
Commenting on the proposed merger, Whitehaven Chairman John Conde AO said, "This is a transformative and exciting transaction which maintains Whitehaven's track record of delivering growth. The Merged Entity becomes one of Australia's leading independent coal producers with a high quality portfolio of producing mines, major development projects and attractive exploration assets."
Nathan Tinkler, Chairman of Aston stated that the merged entity will represent an extremely attractive investment of scale in the rapidly consolidating Australian listed coal sector and will deliver substantial synergy benefits to shareholders.
The companies also said the transaction will have no material adverse change in Whitehaven or Aston.
Grant Samuel Corporate Finance and Goldman Sachs Australia are acting as financial advisers to Whitehaven, and Corrs Chambers Westgarth and McCullough Robertson are acting as its legal advisers.
UBS AG, Australia Branch and Credit Suisse (Australia) Ltd. are acting as financial advisers to Aston and Freehills as legal adviser.
Queen Street Capital and Morgan Stanley are acting as financial advisers to Boardwalk Resources and Gilbert + Tobin act as its legal adviser.
In the Australian Securities Exchange, Aston shares closed Monday's trading at A$9.9, up 1.43 percent, on 2.72 million shares, against a three-month average volume of 1.16 million shares.
Whitehaven Coal ended at A$5.74, down 1.37 percent, on a volume of 5.25 million shares, against a three-month average volume of 2.23 million shares.
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