SYDNEY/MELBOURNE (Reuters) - Shares in Australia's Whitehaven Coal (WHC.AX) jumped as much as a fifth on Monday on a bid by coal magnate Nathan Tinkler to take it private, but remained well below the offer price as investors highlighted risks in the $5.3 billion conditional offer.
Friday's offer -- at a 50 percent premium to the last close -- came a month after Tinkler made an indicative and incomplete approach for Australia's no.2 independent coal miner.
Tinkler backed by shareholders owning nearly half of Whitehaven offered A$5.20 a share, which would make it Australia's largest M&A deal so far this year.
But the offer is conditional, subject to a committed funding package and in need of fresh equity.
"There's a fair bit of skepticism," said Jason Beddow, managing director of Argo Investments, which manages A$3.5 billion and owns a small stake in Whitehaven.
"We'll have to wait and see whether it's a legit bid first," he said, adding that Tinkler may still need to get some more shareholders to roll their shares over or other equity support for the bid.
On Monday, Whitehaven shares rose as much as 21 percent to A$4.18 and by 10.02 p.m. EDT on Sunday were at A$3.98. The shares traded as high as A$6.50 last year.
Analysts said Tinkler's offer would give Whitehaven an enterprise value per metric ton (1.1023 tons) of coal of A$2.87, below recent deals such as the acquisition of Gloucester coal by Yanzhou coal (1171.HK) at A$3.71 per metric ton.
Whitehaven, though has undeveloped coal mines, they said.
"This proposal is clearly not without risks," Nomura analyst David Cotterell said.
"The potential for a competing offer is viewed as low and, due to the conditional proposal, shares are likely to trade at a discount to the offer."
Shareholders owning 48.3 percent of the firm, including Tinkler with 21.4 percent, support the bid, Whitehaven said in a statement on Friday, adding that JPMorgan (JPM.N), UBS UBSN.VX and Barclays (BARC.L) were providing financing. It did not name the other equity partners.
Tinkler's offer follows a string of deals in the Australian coal sector, which has seen the likes of Peabody (BTU.N) and Yanzhou Coal mop up independent miners as coal prices fall, sending shares of miners lower.
Australian thermal coal prices have fallen about 20 percent this year to around $90 per metric ton, nearing the marginal cost of production for some Australian mines and threatening new investment plans.
But further falls in coal prices would hurt Whitehaven's profitability and the feasibility of a debt-funded takeover.
Whitehaven, which as of Friday had seen its share price fall over 20 percent so far this month, said it would give the Tinkler-led consortium four weeks of exclusive due diligence.
Tinkler's offer wrong-footed some investors whose doubts about a bid have mounted as global equity and commodity markets have weakened.
Under current plans, Whitehaven's output is expected to rise to 25 million metric ton by 2016, when about 60 percent of its output will be coking coal for steel mills, from 6 million metric tons a year in 2012.
($1 = 0.9787 Australian dollars)
Reporting by Narayanan Somasundaram and Sonali Paul; Editing by Ed Davies