Coal miner New Hope Corporation (NHC) announced today that it has pulled out of a takeover battle for Resource Pacific Holdings, saying it would not seek to better Xstrata's higher bid.
Xstrata has offered $2.85 per Resource Pacific share, valuing the company at $959 million.
The board of New Hope believes that our offer of 0.94 New Hope shares for every Resource Pacific share was fair and reasonable," said New Hope chairman Robert Millner.
"In our opinion, the ongoing production problems at Resource Pacific's Newpac mine and its inability to progress the development of the long-wall, together with the lack of synergies, does not warrant New Hope increasing its current offer for Resource Pacific."
New Hope will make an application to ASIC to withdraw its offer, but if this is not approved New Hope will not extend its offer when it closes on February 1, 2008.
Mr Millner said that New Hope had the management ability to turn around an underperforming mine like Newpac by increasing coal production by 24 per cent in the first quarter.
"However, we will not overpay for assets."
Mr Millner acknowleged the superior synergies available to Xstrata, which owns a neighbouring mine to Newpac.
He also had doubts that Newpac could meet production figures forecast by the Resource Pacific board, a factor which played a major role in New Hope discounting the valuations placed on Resource Pacific.
New Hope has now shifted its focus to accelerate the development of its New Saraji project in central Queensland.
"The firm will also progress its push into the renewable energy sector, as previously indicated at its recent annual general meeting."
"The recent hike in coal prices, the premium pricing of the Newpac mine by Xstrata and the global interest in renewable energy has brought about a new rating of New Hope's New Saraj developmennt and of New Hope as a renewable energy group."
Resource Pacific's board has urged shareholders to take no action while it considers the Xstrata offer.
New Hope saw little change in the share price today, closing flat at $2.40.
Resource Pacific fell by 3 cents to close at $3.02.
