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Bell Rock opposes Whitehaven’s acquisition of two major BHP mines

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Bell Rock Capital Management, a London-based hedge fund focused on equity market neutral and merger arbitrage strategies, is opposing Whitehaven Coal’s proposed multi-billion dollar deal to acquire two major BHP mines, according to a report by the Australian Financial review.

The Daunia and Blackwater mines in Queensland, which were put up for sale in February by BHP and its joint venture partner Mitsubishi, are expected to expected to secure bids of between US3.5bn and $5bn billion, with Whitehall and other groups including Yancoal Australia, Coronado Global Resources and BUMA Australia, reportedly in the running to acquire the assets.

Bell Rock though, is conducting an increasingly aggressive campaign opposing a Whitehaven bid and has written to the company’s board raising concerns about a “general lack of clarity around growth and expansion plans”.

Bell Rock also engaged EMRS, a third-party research house, to poll investors with the survey finding that an overwhelming number of respondents agreed that “increased shareholder returns through payment of dividends” should be Whitehaven’s priority, while a clear majority of larger shareholders disagreed that the company should “increase borrowing to invest in new mines”.

In the letter, Bell Rock wrote: “We understand that BHP is selling the Daunia and Blackwater mines because it does not regard them as value accretive … Can the Board or Management explain the rationale behind acquiring these mines”.

“Can the Board or Management confirm what valuation metrics will be used to determine whether an acquisition is value accretive.”

And in a statement issued on Sunday, a Bell Rock spokesman said “We don’t want to see the board renege on returning cash to shareholders who are expecting it, to fund this deal. We would like the board to … put the deal to a vote of all shareholders.”

Whitehaven has responded by saying that the company is “always actively engaging with our shareholders, including in this instance, to assist in deepening their understanding of the business”.

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