Back in October, New Hope’s initial bid of $1.50 per share received a hostile reception from NEC’s board, while a $1.75 bid did not fare much better last month.
NEC still maintains that New Hope’s offer undervalues the company, citing an independent expert’s preferred lower valuation range of $2.70-3.99 per NEC share.
But the explorer’s board failed to secure a stronger counter-offer from other potential bidders.
“Discussions with some parties reached an advanced stage prior to them withdrawing,” NEC announced.
“As late as last night, advanced discussions were terminated by the final alternative contenders.”
Recognising that New Hope’s latest bid, due to close at 7pm on Friday, is at a 94.7% premium to NEC shares before the first offer last year, NEC’s board could see a wave of selling ahead.
“The board and its advisers have, over the past two weeks, been engaging with both institutional and retail shareholders to understand shareholder intentions regarding NHC’s final offer,” the company said.
“Several major institutional shareholders have indicated they will accept New Hope’s final offer in the absence of a higher bid.
“Taking all of these intentions into consideration, the board recognises that a significant number of shares are likely to be acquired by NHC in the absence of a higher bid.”
Consequently, almost all members of NEC’s board have decided to recommend New Hope’s offer, although they consider it unlikely that New Hope will reach the 90% shareholding required to trigger a compulsory acquisition.
Only alternate NEC director Jie You, from Chinese steelmaker Xinyang Iron & Steel Group, has indicated he will not sell his shares to New Hope.
NEC director Geoff Lord intends to sell his shares, but declined to make a recommendation to accept New Hope’s latest bid.
The other NEC directors believe there is a risk that NEC shares will fall below $1.85 once New Hope’s offer closes.
New Hope chairman Robert Millner told ILN last year that NEC did not have the capital to develop its deposits.
NEC is on track to start production from the 500,000 tonnes per annum Colton hard coking coal deposit within its Maryborough project in 2012 and has a port allocation for this amount from the first-stage development of the Wiggins Island Coal Export Terminal.
While the new terminal is not expected to start shipping under its stage 1 capacity until 2014, NEC already holds an allocation through Barney Point for the interim period.
The explorer’s Elimatta open cut project in the Surat Basin hosts 106 million tonnes of marketable reserves with mine construction slated for late 2011.
NEC shares surged by 39.5% to $1.55 on the day the $1.50 takeover offer was announced.
Shares in the Queensland explorer are up 1c to $1.85 this morning.