ASX-listed Universal Coal has slammed its largest shareholder Ichor Coal for making a hostile takeover bid. Ichor had offered it a price of 16 cents a share, despite an independent expert report by KPMG projecting Universal Coal's shares to be of higher value at 34¢ each.

KPMG's projection gives Universal Coal an exalted value to the entire company at AU$172 million, reported The Sydney Morning Herald.

Hailing the KPMG report, Universal's independent directors described the offer by the shareholder as “highly conditional, opportunistically timed ... [and] at a discount to the fair market value assessed by the independent expert.” It urged shareholders to take no action on the bid.

Universal Coal has already made it public that it has received a non-binding offer at 20¢ cash, although it is short of the valuation range of 26¢-34¢ per share mooted by the KPMG.

The independent expert's report gave boost to Universal Coal's shares by almost 8.8 percent and its per share price touched 18.5¢ on Tuesday, which was higher than the 16¢ offered by Ichor.

Universal has coal mines in South Africa. Its second mine will go on stream by the end of 2015. The Kangala mine achieved steady operations and the New Clydesdale Colliery will be full production in a few months’.

Revenue base

Though coal is losing its lustre globally on the back of crashing international prices, the case is different with Universal’s coal business in South Africa, where coal production is sold within the domestic market. The local power utility Eskom ​is the company's main buyer and it is adding more power stations to address domestic power shortages.

Universal Coal reportedly commands a profit margin of AU$15 per tonne of coal sold to Eskom, according to analysts.

“The bid has come in just prior to a step-up in output,” Universal Coal CEO Tony Webber said. He was referring to its second mine, which is due by year-end. He asserted that Universal Coal "is an effective annuity."

Coal deal

Meanwhile, Universal Coal has entered into a sale of prospecting right agreement with South African coal major Exaaro to acquire its Arnot South project. The multiple seam deposit hosts three coal seams in the Witbank coal field, reports Mining Review.

"The acquisition of Arnot South increases Universal Coal’s thermal coal resource base by 25 percent, further strengthening our position in the Witbank coal field,” Webber said.

Exxaro had maintained that Arnot South was no longer strategically aligned with it and wanted a public disposal process, with Universal Coal emerging as the successful bidder. Arnot South has had several drilling campaigns since 1970s, including Gold Fields. Exxaro is its latest.

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