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Merchant bankers show CIL way to foreign acquisition

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Source: Financial Express, June 20, 2019

Coal India (CIL) has decided to go for an open tender for appointing a merchant banker to acquire coking coal assets in Australia, following a pre-notice inviting tender (NIT) meeting on Wednesday.



Coal India (CIL) has decided to go for an open tender for appointing a merchant banker to acquire coking coal assets in Australia, following a pre-notice inviting tender (NIT) meeting on Wednesday.



CIL drew suggestions from merchant bankers about the format of the tender document that is likely to be floated in two weeks. Following the appointment of the merchant banker, the company will finalise the coal asset, which it would either acquire entirely or pick up stakes in with an offtake agreement, a CIL official said.



“We had to draw suggestions from merchant bankers on the format of the tender document since it would be the first such initiative from CIL to float a global tender for acquiring an asset abroad,” the official said.



Although CIL has got coal assets in Mozambique, those were acquired through International Coal Ventures Ltd (ICVL), a four-way venture of CIL, SAIL, RINL and NMDC. Although NTPC joined the venture initially, it pulled out in the middle. ICVL was, however, dismantled at a later stage.



Although CIL didn’t want to name the merchant bankers who took part in the pre-NIT meet because of a disclosure agreement signed with them, officials said every merchant banker who attended the meeting has presence in Australia since that is pre-requisite for participating in the tender.



Most of the major global merchant bankers like Goldman Sachs, Merill Lynch and others alike had pulled out of coal after the Paris convention on climate change that brought a number of regulations. There are a few global players like ANZ, BNP Paribas, JP Morgan others that are still working on coal assets.



A company source close to the development told FE that CIL is betting on ANZ but the merchant banker would be appointed through the process of a global tender. The appointed merchant banker will be responsible for doing the financial due diligence and carrying out the entire transaction. It is only on the basis of the suggestion of the merchant banker that the PSU miner will zero in on the asset, a CIL official said.



Earlier, CIL had called for a limited tender to rope in a merchant banker, which virtually received no response. “The pre-NIT meet has given a clearer picture as to how to go ahead with the plans of foreign acquisition,” the CIL official said, adding that CIL has been to trying acquire coking coal assets abroad since 2012 and has been looking for opportunities in the US, Canada, Russia and Australia.



It had formed an expert group with representatives from the Ministry of External Affairs, coal and Department of Economic affairs to look into the nitty-gritty of foreign acquisition.



News Source: Financial express
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