Anglo close to selling Australian coal assets to Apollo consortium

17 October 2016

Anglo American is expected to finalize a $1 billion-plus sale of its Australian coal assets to a group headed by private equity group Apollo Global Management in the coming weeks.

Anglo American, like its peers, is selling off assets after a prolonged commodities slump left it with too much debt.

Chief Executive Mark Cutifani has said the company will focus on three commodities — copper, diamonds and platinum.

Selling assets has taken longer than expected as a strong recovery in coal and other commodities this year has reduced pressure on miners to sell, while increasing pressure from shareholders to achieve the best price.

Peabody Energy Corp and Nippon Steel this week set the fourth quarter metallurgical coal contract benchmark at $200 a metric ton, more than twice the price of the previous quarter.

Analysts and the sources who spoke to Reuters on condition of anonymity said, however, that Anglo’s divestment strategy was still in place.

“Cutifani and Anglo are 100 percent committed to the sale,” one source said.

Anglo American said in February that discussions were under way to divest its Moranbah and Grosvenor coal mines in Queensland state as part of its plans to sell $3-4 billion of assets this year. The process is being run by Bank of America Merrill Lynch.

“BHP and Mitsubishi offered between $1.1 and $1.2 billion in cash and the Apollo consortium offered slightly more but faced funding issues that are now being worked out.”

Anti-competition concerns that could have slowed or killed a sale to BHP, was also a major factor in Apollo’s favor, the source said.

“The other issue around BHP was that virtually every Japanese coal customer was massively opposed to a BHP acquisition and prepared to fight it,” the source said.

Source – Reuters