The board of Gujarat NRE Coking Coal has advised company shareholders to reject Jindal Steel and Power's all-cash Rs 1,200 crore takeover bid, saying the offer does not adequately reflect future prospects.
"Your Directors unanimously recommend that you reject the Jindal offer," Gujarat NRE Coking Coal Executive Chairman Arun Kumar Jagatramka said in a statement.
Jindal Steel and Power (JSPL), which holds 19.48 per cent stake in Gujarat NRE Coking Coal, made the offer on January 31. Gujarat NRE Coking Coal is Australian subsidiary of Kolkata-based Gujarat NRE Coke. JSPL also has a coking coal supply agreement with Gujarat NRE Coking Coal.
Gujarat NRE Coking Coal has two producing coking coal mines in Australia, which are estimated to have reserves of 125 million tonnes (MT) and resources of 651 MT.
The offer, launched on February 15 through Australian Securities Exchange (ASX), has valued Gujarat NRE Coking Coal's shares at Australian dollars (AUD) 0.20 apiece. The offer remains open till March 15.
"The Offer undervalues your Gujarat (NRE Coking Coal's) shares and does not adequately reflect company's future prospects. The Directors and major shareholders who control approximately 64.1 per cent of the company shares outstanding intend to reject the offer," the company said.
It added that Gujarat NRE Coking coal intends to increase its production to 5 million tonnes per annum in near future and has advanced the approvals from the Australian government.
The JSPL's offer to acquire the remaining stake of the company at 0.20 per share via on-market bid was at a premium of 5 per cent over the closing share price of Gujarat NRE Coking Coal shares on January 29.
Since then, Gujarat NRE Coking Coal's shares are being traded between AUD 0.225 (22.50 cents) and AUD 0.20 per share on the ASX. On Friday, company shares closed at AUD 0.20 apiece.
Jindal Steel will have to shell out a maximum of AUD 221.61 million if it receives 100 per cent acceptance, its bid document had shown.
The bid, if successful, would help JSPL in securing coking coal supplies to a big extent for its projects in India as it wants to have a 20 MT per annum steel making capacity by 2020.