(EnergyAsia, February 27, Friday) — Singapore-listed commodities trader Noble Group has expressed “serious concerns” over Gloucester Coal’s planned A$900-million merger with fellow Australian coal miner Whitehaven Coal. (US$1=A$1.55).

Despite being Gloucester’s largest shareholder with a 21.7% stake, Hong Kong-based Noble said it was not informed or consulted by Gloucester’s board of Directors prior to the merger announcement on February 20. Noble said it is reviewing the rationale and conditions of the merger.

It said: “Based on preliminary work, Noble is particularly concerned the structure of the proposed merger prevents any possible contest for control of Gloucester.”

Noble said Gloucester directors have failed to provide for its shareholders to benefit from a contest for control of Gloucester by not including in the merger proposal a common fiduciary carve-out allowing Gloucester to withdraw from the merger proposal if there is a superior offer for Gloucester.

A Noble Energy director, William Randall, said: “In our view this reverse takeover of Gloucester eliminates the opportunity for shareholders to opine on the future direction of the company, a direction which could deliver substantially more value for all Gloucester shareholders.

“The merger proposal effectively seizes control of Gloucester in a way that detracts from third party interest that would potentially increase shareholder value for all Gloucester shareholders.

“Gloucester Coal has been subject to previous corporate activity, and the merger proposal does nothing to stimulate that sort of interest again.”

Given the relative size of Gloucester and Whitehaven, Noble views the merger as effectively a “reverse takeover”.

As the smaller entity, Gloucester proposes taking over the larger Whitehaven and paying for it with Gloucester scrip.

Control of the merged entity will therefore pass to the current Whitehaven shareholders, which include directors of Whitehaven who together will hold a beneficial interest in the merged Gloucester entity of approximately 55%.

The structure of the proposed merger also does not allow Gloucester shareholders to vote on whether or not the merger should proceed. The proposed merger is a transformational transaction and will result in a change in control of Gloucester.

Noble believes that such a transaction should be put to all Gloucester shareholders, and not be at the sole discretion of the Gloucester directors.

“All Gloucester shareholders should have a real say in whether there is a change of control of Gloucester, and whether the terms being proposed are really good enough for Gloucester shareholders to hand over control of such valuable assets.

“Gloucester has a world class suite of coal assets, and as the largest shareholder with significant expertise in global coal markets, Noble does not believe the Gloucester claim that the merger will create value for Gloucester shareholders is satisfactory,” Mr Randall said.

Noble said it is reviewing the merger proposal in further detail ahead of deciding any action it may take to protect its investment in Gloucester.