Whitehaven-Aston merger bolsters market

LOCAL stocks rallied yesterday after a rash of corporate deals, led by a $2.25 billion "merger of equals" between Whitehaven Coal and Aston Resources, boosted energy and mining stocks, while investors welcomed news Europe's leaders had agreed to rein in spending in the troubled euro zone.

By InvestSMART · 13 Dec 2011

By InvestSMART ·
13 Dec 2011

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The benchmark S&P/ASX200 rose 49.8 points, up 1.18 per cent, to 4203. It has now gained 5.4 per cent in value in the last two weeks. The broader All Ords rose 47.3 points, up 1.1 per cent, to 4264.1.

In the biggest announcement of the day, Whitehaven Coal said it would acquire Aston Resources for $2.25 billion, putting it among Australia's biggest listed coal groups.

Billionaire Nathan Tinkler, Aston's biggest shareholder, is supporting the deal, agreeing to swap his 32 per cent stake in Aston for shares in Whitehaven. Aston shares rose 14? to $9.90, up 1.43 per cent on the news, but Whitehaven shares dropped 8?, or 1.37 per cent, to $5.74.

Meanwhile, industrial and retail conglomerate Wesfarmers dropped 58?, or 1.84 per cent, to $30.90 after amendments to its contracts with BlueScope Steel left it facing a $190 million writedown in its Coregas business.

The major banks performed strongly, led by Commonwealth Bank, up 2.03 per cent to $49.83, and NAB, up 1.42 per cent to $24.36.

The local bourse opened strongly and remained buoyant all day, despite official figures showing October's trade surplus was less than economists had expected.

The $1.6 billion surplus was down $654 million on September, with imports rising sharply. Exports are now up 11.6 per cent on the year, while imports are up 17.2 per cent.

Other figures from the Bureau of Statistics show home-loan approvals rose in October for the seventh straight month, before the Reserve Bank cut interest rates by 0.5 percentage points.

But loans for home construction fell 1.8 per cent, the fourth fall in five months. "Presumably home building will get a lift from the recent rate cut," Commonwealth Securities chief economist Craig James said in a note.

"But the current data is hardly positive for the home-building industry. Population is rising but we aren't adding to the housing stock, suggesting that established home prices will soon flatten and then start edging higher again."

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Frequently Asked Questions about this Article…

What was the Whitehaven–Aston merger and why did it matter to investors?

Whitehaven Coal announced a $2.25 billion deal to acquire Aston Resources in a described 'merger of equals', creating one of Australia’s biggest listed coal groups — news that boosted energy and mining stocks and helped drive a broader market rally.

How did the ASX perform after the corporate deals were announced?

The benchmark S&P/ASX 200 rose 49.8 points (up 1.18%) to 4,203, and the All Ordinaries gained 47.3 points (up 1.1%) to 4,264.1, with the ASX200 up about 5.4% over the prior two weeks as investors reacted positively to the deal news and European fiscal discipline headlines.

How did Whitehaven and Aston shares move on the merger news?

Aston shares rose to $9.90 (up about 1.43%), while Whitehaven shares fell to $5.74 (down about 1.37%) on the announcement — reflecting the market’s immediate re-pricing of the combined group and share-swap mechanics.

Who is Nathan Tinkler and what role did he play in the transaction?

Billionaire Nathan Tinkler, Aston’s biggest shareholder, backed the deal by agreeing to swap his roughly 32% stake in Aston for shares in Whitehaven, a move that helped secure support for the merger.

Why did Wesfarmers shares fall and what is the Coregas writedown?

Wesfarmers dropped after amendments to its contracts with BlueScope Steel left it facing a $190 million writedown in its Coregas business, pushing the conglomerate’s shares lower on the day.

How did major Australian banks react to the market moves?

Major banks performed strongly alongside the rally: Commonwealth Bank rose about 2.03% to $49.83 and NAB gained about 1.42% to $24.36, helping support overall market gains.

What trade and economic data influenced the market alongside the corporate deals?

Official figures showed a $1.6 billion trade surplus in October, down $654 million from September as imports rose sharply; exports were up 11.6% year‑on‑year while imports rose 17.2%, data that investors weighed alongside corporate news.

What did the article say about housing data, home loans and the RBA rate cut?

Home‑loan approvals rose in October for the seventh straight month ahead of the Reserve Bank’s 0.5 percentage point rate cut, but loans for home construction fell 1.8% (the fourth decline in five months); Commonwealth Securities’ chief economist Craig James said the rate cut may help building activity but current data wasn’t very positive for the home‑building industry.