Afrimat shareholders yesterday cheered plans by the road construction and materials group to walk away from the acquisition of Australia-listed coal company Universal Coal.
Afrimat’s share price increased up to 5.8 percent to R33.60 following the announcement, before closing at R33.55. The price rise also far outstripped more than 3 percent the increase in the construction and materials index at the same time, although Afrimat is a major component of the index.
In April, Afrimat first announced its offer to buy Universal Coal, which also has operations in South Africa.
It’s A$0.40 (R3.95) per share (R2.1 billion) bid represented a rival bid at the time. Ata Resources had also made a cash offer for Universal at A$0.35-0.36 per share.
Universal, which also supplies coal to Eskom, reported an 80 percent increase in earnings before interest tax, depreciation and amortisation (Ebitda) in the six month to February 28, and its management said at time that they expected the strong performance would continue in the second half.
“Following a thorough due diligence process and extensive consideration, Afrimat’s board and management have decided not to proceed with the acquisition, given the size and nature of the transaction,” Afrimat said.
Universal chief executive Tony Weber said the past 12 months had been very busy for them, with two takeover proposals being received, and each requiring the dedication of significant management time and expense.
“Notwithstanding this, the company has been able to continue to deliver against its targets and is on-track to achieve its Ebitda guidance of A$93 million."