Afrimat walks away from R2.1bn coal deal

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October 14, 2014. Andries van Heerden CEO of Afrimat Limited in Cape Town. PHOTOGRAPH: ESA ALEXANDER/SUNDAY TIMES

Building materials supplier Afrimat has decided not to go ahead with the R2.1bn acquisition of Australia-listed Universal Coal.

Afrimat, which has a market capitalisation of R4.5bn, said in April it had made an offer for Universal Coal, which operates in SA. It offered a maximum price of A$0.40 (US27c) a share.

At the time, Afrimat CEO Andries van Heerden said the deal could make sense as SA – via power utility Eskom – was set to rely on coal-fired power stations for at least another 20 years.

“Following a thorough due diligence process and extensive consideration, Afrimat’s board and management has decided not to proceed with the acquisition given the size and nature of the transaction,” the company said in a statement on Wednesday.

Independent analyst Anthony Clark said the deal may have flopped because Universal Coal’s owners “were too bullish with their cash flow assumptions on the coal mines”.

If that was the case, the valuation would have been a stretch, Clark said.

Afrimat’s shares have risen 4% since the deal was announced in April. They were last traded at R31.75.

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